The old-fashioned methods of business loans supplied by the UK’s big banks are not always the most feasible option for UK businesses. In fact, more and more small businesses are looking to alternate ways of lending, from merchant cash advances to asset finance to accommodate the changing needs of the fluid business world.
Invoice factoring may be a relatively new form of lending in relation to other, well-established methods, but it is quickly becoming the go-to method for SMEs to free up money that would otherwise be tied up in outstanding invoices with the other clients they do business with.
When a business decides to take invoice financing into consideration it is important that they compare the options available. There are plenty of big names that provide invoice financing but there are also some smaller, independent lenders that can provide the right option depending on a business’ circumstances.
These are the major reasons why it is so important to compare invoice financing quotes:
- The amount you receive on your invoices
If you decide to lend against your client’s unpaid invoices, the lender will make a percentage available up front to you and recuperate the rest of the outstanding money themselves. Some lenders will make 95% of the outstanding balance available but some others may only make 85-90% available, retaining the 10-15% extra for their services.
- Will your clients know you are lending?
Certain invoice financing options require the money to be recuperated by the lender directly from your clients. This will directly inform them that you are borrowing money against their unpaid invoices that some companies may see as a bad sign. Others will remain anonymous throughout the process, so your clients will not know that you are lending money.
- Who recuperates the unpaid invoices?
Once the capital is made available to you the lender may be the one to recuperate the remaining funds from your clients, freeing you up to spend time on more important things. Others may require you to be the one to recover the outstanding balance in order to pay back your loan’s interest.
By comparing invoice financing quotes you can ensure that the deal you get is the one that is correctly suited for your business.