Cash Flow Finance

CASH FLOW FINANCE

An increasing number of businesses are turning to sales linked finance in the form of invoice discounting or factoring because it brings cash into a business quickly.

Cash Flow Finance works very simply, as cash flow is directly linked to company sales activity. This means the busier your business becomes and the more sales you achieve the larger your credit line becomes.

The advance is secured by taking a charge over your debtors i.e. (the customers who owe you money in respect of outstanding invoices). The advance may be as high as 85% of the value of your debtors, therefore if you have invoiced a number of customers over the last three months who owe a total of £200,000 then the initial advance to aid the expansion of your business may be as much as £170,000.

By releasing this money you may be able to pay your own suppliers earlier thereby improving your negotiated discounts with them, you may be able to purchase other assets for your business, improve and increase your marketing or recruit additional staff. You may also use the advance to consolidate existing debts pay off expenses, HP agreements or even settle an outstanding tax liability. The choice is yours.

The main advantage of factoring is its general flexibility and your ability to draw additional funding in direct relation to the success of your business and particularly linked to the improvements of your sales. Many companies utilise a factoring or invoice discounting facility instead of a Bank Overdraft as the advance can be comfortably increased in line with your companies successful development. Most businesses are able to qualify for a cash flow finance facility as long as they are selling goods or services to other businesses on credit terms. Industries mainly served are those which include manufacturing, distribution and service companies where invoices are raised for completed services.

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