So, rather than factoring (or discounting) your entire sales ledger, you might want to consider an alternative – Spot Invoice Finance. This service allows you to factor individual invoices when you need to, rather than factoring every month. It is easier to explain a one-off factor to your customers than a continuous service.
Bear in mind, however, that you cannot spot factor an invoice if you already have a factoring service in place. Also, the companies offering this service are still very specialist. This means they are likely to be smaller and will, therefore, charge you more per invoice than factoring everything.
Spot Factoring, even if it is marketed as Spot Discounting, is not confidential either. Your customer will have to speak to the financer, not just to confirm that the invoice you are factoring is acceptable to them, but also to confirm credit terms and, possibly, to agree to the credit terms of the Financing company. Also, if there is likely to be a dispute regarding the invoice, Spot Financing is not the solution. Re-issuing an incorrect invoice will increase the charge levied by the Financer, often exponentially.
On the plus-side, though, security is often not needed for factoring one invoice as the financer will use the invoice itself as security. Also, once the arrangement has been established and due diligence observed, your business can use the service as and when it is required. Spot financing also does away with the need to worry about minimum invoice values as each transaction with the Financer is treated as a stand-alone transaction.
Spot Financing will involve the Financer looking at your business overall and assessing its financial state moving forward, but not in as much detail as a Full Factoring company would. For the Spot Financer, confirming that the invoice in-hand is valid and will be paid by your customer, is much more important.
Is there another solution? You bet your unpaid invoices there is. It’s called Invoice Trading, and it is a new arrival in the market place and is set to change the face of financing invoices completely.
When you trade an invoice, you are selling that invoice to third parties. The difference is, you are in control of the complete transaction. You can decide which invoice (or invoices) to trade, what percentage of the invoice you would like advanced, for how long, and you set the maximum cost of finance – with the buyers bidding down in an auction to give you the most competitive cost of finance..
Invoice buyers – the people who bid on the invoice auctions – assess each auction individually, and compete to offer you the best cost of finance.
You only pay for invoice trading when you use it it’s a pay as you go service, and the costs are clear and transparent, allowing you to create much better cashflow projections moving forward. Your customers are not notified of the sale, so confidentiality is assured. There are no lock-ins, no notice periods, no facility ceilings, and no limits on how much you can raise against any one customer.
Downsides? There is still a cost, naturally. But it’s one you control.
Platform Black specialise in Invoice Trading, if you would like to learn more about this service and how it can benefit your business, why not click invoice finance and see what it is all about?