Invoice Finance for Start-Up Businesses (Guest Blog)

Despite the continuing economic issues the UK is facing, many opportunities still exist there for small businesses to grow, with the most savvy owner managers and ambitious start-ups stepping in and shaping up to take full advantage.

However, being able to fund a business and help it take advantage of these business opportunities can prove tricky.

Something that many business owners will not have considered is invoice finance, as most rely upon personal funds or a modest overdraft from the local bank. But what if an overdraft extension isn’t an option, or personal funds run out?

Whether this is due to never having had to look for alternatives before, not being aware of other sources of finance available or, indeed, nervousness regarding the past stigma of factoring in some sectors, remains unclear.

What is clear, however, is it is a fact that one of the biggest problems facing new, young businesses in 2013 is how to fund their businesses, so there is naturally a need to ensure such businesses are made aware of the availability that invoice finance could prove to be a viable alternative for many.

What is invoice finance?

Alternative lenders offering invoice facilities will purchase your outstanding invoices and advance as much as 90% of the cash to your business within 24 hours. This takes the strain out of the cashflow and provides a much-needed boost to a business’ liquidity.

The two main forms of invoice finance are factoring and invoice discounting, which both advance cash to your business. The main difference is that factoring also provides a specialised credit control service, to chase up payments and ensure your credit control runs efficiently, whereas invoice discounting allows your credit control team to function as usual.

Could it work for your business?

More and more owner managers are benefiting from being able to release cash they have tied up in their invoices via invoice finance facilities.

Costs associated with invoice finance are often comparable to those incurred from traditional bank facilities, so it may not be as expensive as you’d think.

Invoice finance isn’t suitable for every start-up business, but if getting cash quickly into your business is the biggest issue you face, it’s certainly worth serious consideration.

Author

Andy Grantham is Sales & Marketing Director at Skipton Business Finance (www.skiptonbusinessfinance.co.uk).

Skipton Business Finance, a subsidiary of the Skipton Building Society Group, is an invoice financier offering a range of flexible working capital solutions for businesses with turnover ranging from start-up to £30m