January 20th, 2014. Ben Lloyd
SMEs and Invoice Factoring: Who Can Benefit?
Are you a small business looking at your available finance options? Perhaps you have clients who haven’t paid up and now you are low on cash? Well, have you considered invoice factoring?
If you’ve read our previous posts then you’ll know all about invoice factoring and how it works but have you ever considered if it is right for your type of business? Invoice factoring is a finance option mainly used by small businesses who send invoices to their clients. If a customer does not pay on time this may affect the business production so this is where a credit control service will step in.
Invoice factoring can be used by any small business that uses invoices in order to receive payments, but it’s usually used for services rendered rather than the payment of products. This means that invoice factoring becomes an available option for certain industries. Here are a few types of SME that may benefit fromsmall business invoice factoring:
Construction Workers or Contractors
When completing construction work on a commercial property a contractor will provide a quote before any work is done and then invoice the business once it has been complete. Whether it is some simple electrical work such as putting up a new light fitting or the addition of a huge extension to the premises, all work will be billed for.
If a customer does not pay up straight away this may have a negative effect on the company, decreasing cash flow and restricting the contractor from buying materials for their next job. Invoice factoring works well in this case as an independent party will provide an upfront payment and then collect the fees from the loaner in due course. Invoice factoring assures cash flow and therefore provides a steady income.
IT Companies or Web Designers
IT companies and web designers tend to work in one of two ways: either on a one-off basis such as for repairs or on a project creation and maintenance deal which is ongoing. With ongoing contracts receiving payments may sometimes be tricky as payment relies on the success of the receiving company. If they do not make money they cannot pay you.
The use of invoice factoring assures payments but maintains the good working relationship between parties. Constant nagging for payments can become annoying and put off a client from working with you in the future but the use of a third party will keep things strictly professional.
Landscaping or Housekeeping Firms
With gardening or cleaning, like many other businesses, time is money. Workers in this industry don’t have time to go and chase up payments as this will keep them away from potential paying clients. By using invoice factoring all your time will be freed up meaning you can focus on customers who do pay on time.
At least in this industry you don’t have to spend time researching where the client is based as much of this work is done at the clients’ home.
Do you work in any of these industries? Or perhaps you work elsewhere and are considering small business invoice factoring. Well, get in contact with Pure Commercial Finance today for advice!
Article By Ben Lloyd
January 20th, 2014
Ben is the Director and Co-Founder of the Pure Group and Managing Director of Pure Property Finance.
Following a career in Barclays, where Ben was in the real estate finance team for 8 years, he decided that the market needed a more forward-thinking type of commercial brokerage so founded Pure Commercial Finance (now Pure Property Finance), the first company within the Pure Group.
Ben has extensive experience across the real estate sector and has participated in over £2bn of real estate transactions during the course of his career.
Ben oversees the general strategy at Pure Group and works with the senior leadership team to drive the Group forward. Ben is also on the Executive Committee of FIBA.See more articles by Ben