What to look for in an Invoice Finance provider

Choosing the right invoice finance provider is crucial to your business' future viability

With a plethora of invoice finance providers out in the marketplace, ranging from large bank-owned machines to small, niche providers, it is important that business owners make the right choice of provider for their business.

Whilst the products are very similar, the delivery of the service varies greatly and can be critical to the success of a business.

The importance of the following can often be overlooked, as many businesses focus purely on price, and can cause problems down the line.

Local Operations Centre

  • Does the invoice factoring company have a local office where operations staff are physically based?

Many have sales offices in the regions but accounts are managed from remote centres where the staff may not know who you are and you are merely a client number.

It is important you know and meet your relationship team and more importantly they know you and understand your business.

If there are problems, (and in any relationship there may be some!) can you call in to the local office to sort them out and can your Relationship Manager call in regularly to your premises to provide support if/when required?

Access to decision makers

  • Can you get quick decisions when they need them most?

It is always helpful if your Relationship Manager has authority to actually make decisions rather than constantly having to “refer to credit”.

Business moves fast these days and so you need to be able to deal with decision makers for those daily operational issues.

Win/win relationship

Both parties need a relationship built on mutual benefit and trust.

Both the client and the factoring company must have agreed a deal which is acceptable to both parties. If one is unhappy because they feel the negotiations have all been one-sided, then it’s not a great start for an ongoing working relationship.

There needs to be transparency in what the facility actually provides and what it will cost.

  • Are the headline rates realistic when comparing facilities and are there any onerous terms such as extended notice periods or minimum base rate figures?

Most factoring companies use the strap lines of offering flexible, tailored cashflow solutions... but how many really are?

Business owners need to be sure they are comparing like-for-like and understand any potential restrictions not included in the headline figures, such as credit limits or reserves etc.

Peace of mind

  • Who is behind the invoice factoring company?
  • Will they be there for the long term?

In order to be sure the factoring company will be there when you need them most, look into their parentage and pedigree. There have been numerous players over the years that have roared into the UK market only to leave with their tail between their legs when times get tough.

There is always the danger of putting all your eggs in one basket if you sign up with your bank. This can be a double-edged sword as in many cases it can allow for increased facilities but can also lead to the bank pulling the strings.

Diversity of funding can add strength to your business preventing one provider have too much influence.

Unfortunately, the proof of the pudding is in the eating, but by then many businesses have signed up for a 12 month agreement which can cost dearly to exit early.

The key is to do your homework and make an informed decision.