Have you outgrown your overdraft?

Andy Grantham regularly blogs about business finance solutions such as factoring and invoice discounting

The holidays are nearly over and it’ll be back to the grindstone for most business owners.

A quiet Summer break can be a welcome respite from the daily rigours of work, although many may have used the time to reassess their business finances, with some worrying conclusions about the coming second half of the year.

SME’s are increasingly finding their existing overdraft facilities too restrictive and, with banks being unwilling to lend more whilst also requiring more personal security and higher fees, are looking to secure alternative funding for their business.

This has allowed the Invoice Finance market to step in and fill some of the vacuum with a variety of flexible Invoice Factoring and Invoice Discounting facilities being available.

In order to compare Invoice Finance to a traditional bank overdraft we need to understand how an overdraft is viewed these days from both the perspective of the bank and its clients:

From the bank's point of view

Recent changes in legislation mean the bank’s security requirements for the overdraft is rising and they are increasingly looking for higher levels of personal security.

The granting of an overdraft is dictated by the historic financial performance of the client and, in the current economic climate, most businesses have seen some weakening of their balance sheet and perhaps losses, which ultimately makes it more difficult for the bank to agree to an overdraft.

From the client's point of view

The problem with an overdraft is it is repayable on demand and can be withdrawn at any time.

The limit is usually fixed and, should more be required the client generally has to go through the whole process again. This can only result in more time and cost.

You may also have to put your home or other assets up as security.

What can Invoice Finance offer?

Invoice Finance offers real benefits to owner-managed businesses that choose to utilise such facilities across the UK:

  • It generates more cash than an overdraft (usually twice as much)
  • Less personal security is required meaning there is no need to put up your home as security
  • The facility is linked to your sales, not your historic balance sheet and will therefore grow with your business - meaning you don’t have to keep going back to the bank asking for more!
  • It’s not based on historic balance sheet performance and therefore is suitable for businesses in a turnaround or highly geared
  • Financial stability is more certain, as agreements are for a fixed period and are not repayable on demand
  • With Invoice Finance, you can confidentially outsource management of your entire sales ledger to Skipton Business Finance via our award-winning My White Label solution saving you both time and costs and helping avoid those difficult calls when chasing customers for payment Invoice Factoring, you can outsource management of your entire sales ledger saving you both time and costs and helping avoid those difficult calls when chasing customers for payment

Contact us today

If you would like a no-obligation FREE quote, please get in touch by ringing us on 0800 0854150 (call 0330 1232437 if ringing from a mobile).

You can also email us at info@skiptonbf.co.uk.

Or why not utilise the handy form on the right and we'll call you back!