Posted: 10 / 09 / 2020

By Leyton Jeffs, Funding Partner at Sedulo

Invoice finance is a popular form of finance but with so many options out there, understanding it better is key. My top five tips come from a position of experience; I’ve worked in senior roles for invoice finance organisations for over 10 years, I’m an owner of a business that has used invoice finance and as a broker, I’ve brokered well more than 100 invoice finance facilities.

1. Invoice finance beauty is in the eye of the beholder

There are over 50 providers of invoice finance in the UK and there isn’t a league table of the best and worst provider. Each of the providers is the best in a set of circumstances and could be the worst if the circumstances were different. One provider will be excellent in the recruitment sector whilst another will be more flexible when it comes to having a highly concentrated customer base. The key is understanding which provider is good at the different elements or challenges within your business.

2. Understand different products

There are lots of providers, each with different products within invoice finance often all called different things! From invoice discounting which is a very light touch from the lender, to full factoring where the financier provides more of the services such as credit control. It is important to know what is out there, what is your preference and also what you may qualify for.

3. Read the small print

Comparing one provider to another using only headline figures is a recipe for disaster. It’s not only the headline rates but also the smaller, more hidden charges. Also, it doesn’t just relate to charges – cheapest isn’t always best! The cheapest option may have covenants or restrictions that just don’t work for your business and the costs of changing facilities or worse, changing your business will far outweigh the saving.

4. Review regularly

The market changes all the time and with increased competition comes better pricing, increased service levels and more flexibility. Every 12 months, it is worth your while to test the market to ensure that you have the best possible provider for your individual needs.

5. Don’t get sucked in by the salesman

Salespeople are supposed to be charismatic and charming but three months in, they will be long gone. Don’t consider the relationship you have with the salesperson when choosing a provider, instead ask to meet the relationship manager/risk people that you will be assigned, as the relationship with these people will be far more important. So many people choose their provider through the rapport built with the salesperson and it is the number one mistake I see.

If you are looking at invoice finance and the options out there are confusing, get in touch for a no-obligation meeting or video call with one of our funding experts.