There is an old saying in finance that “Cash is King”, and this is still valid today. Cash is required to pay for commercial mortgages, or rent, salaries for the workforce and other day to day expenses.

Many businesses offer their clients terms of 30 days from the date of invoice before the funds are required to be paid. However, this could affect the day to day cashflow of the business.

There are two main methods of funding, factoring and invoice discounting.

Factoring – this provides up to 90% of the invoice to be paid as well as providing sales ledger control and cash collection service. The funds can be in the clients bank account usually within 48 hours.

Invoice discounting – funds can be withdrawn against issued invoices with the client keeping control of the sales ledger and credit control functions.

Case Study

A small engineering company was set up by experienced directors and quickly won several contracts. They requested an overdraft facility from their bank to cover the working capital requirement of the business. The bank wanted to see a comprehensive business plan including projections and also required to take security over the directors’ residences.

They were introduced to a factoring company who quickly established a facility based on 80% of the issued invoices with the funds being transferred into their bank account within 48 hours.

This gave them the flexible facility they required without having to give their homes as security.