Is Your Invoice Finance Facility Restricted?
It Does Not Need to Be.
We see a lot of invoice finance clients where their facilities are restricted and this causes frustrations. Restrictive facilities can hamper the growth of your business. This could be for a number of reasons:
– overall funding limit
– low prepayment – we can offer up to 100%
– an individual debtor limit
– concentration or high involvement limit – we can offer up to 100%
– export caps
– certain types of work excluded
Arguably if your facility is restricted it means your facility is not structured properly and you are probably with the wrong lender.
We were approached a client of Close Brothers Invoice Finance who was frustrated with the lack of funding they were receiving. They had a ledger of £400,000, the debt was not aged in a worrying way but they were restricted to just £150,000 of funding. Our client was frustrated and had tried to get Close Brothers to increase his funding but he found them inflexible.
Their main issue seemed to be that the main customer represented up to 90% of the outstanding ledger. This particular customer does however have a turnover of over £1bn.
We were able to structure a new facility with a new lender that fully funded the ledger. That meant a 266% increase in funding. The overall facility limit, the debtor limit and the concentration limit all allowed maximum funding to be generated. The client had a facility with no frustrating restrictions and a lender that the business owner described as, “more approachable”.
Sadly, some lenders are not particularly flexible and restrictions will occur. If they will not accomodate your funding requirement it is time to look elsewhere.
The key to setting up any invoice finance facility is structure. It needs to take into account the sales ledger as it stands but also try to forecast what may happen in the future. Are you working with a large customer and expecting a large order that may cause a concentration issue? Are you going to start exporting? Are you thinking of offering additional services such as installation? All these things can impact on whether your facility may be restrictive at the outset or even in the future.
If you have a restrictive facility for whatever reason, contact us today as the likelihood is we can help you.
0845 251 4040