Start-ups and Factoring

Despite the mixed messages from Government in respect of business with one hand claiming that UKplc should pick up the slack from the austerity measures (read savage cuts) but on the other hand abolishing regional development agencies and Business Link, some are wondering who would be crazy enough to go alone and start a new business in this current economic climate?

It seems that some have no choice, with redundancy forcing their hand, but even in such times with our economy being so fragile, there are many brave and bright souls taking up the challenge.

Seemingly in answer to these mixed messages, the new director general of the Confederation of British Industry (CBI), John Cridland, has urged the government to put a ‘relentless focus’ on growth to give businesses the confidence to invest, export and create jobs. Cridland said the next two years will be mission critical for UKplc and said the government must use the forthcoming Budget as an opportunity to set out a clear vision for Britain’s economy, which incentivises growth.

Factoring is nearly always a product that most new businesses will require as during the early stages of the business life cycle, as suppliers often don’t offer favourable invoice terms owing to lack of credit history, but in turn customers want to draw out their invoices and settle as late as possible, thereby putting untold pressure on a start-ups cash flow position. This is compounded when those customers don’t pay on time and squeeze an extra few days or weeks before settling the invoice late.

The effect of this imbalance can range from delaying growth plans or putting off investment in more staff and equipment to trading insolvent as there simply isn’t enough cash to fund the business’ liabilities and in doing so, risk liquidation.

Unlike traditional bank lending, which is as rare as an honest politician in any case; invoice finance facilities such as factoring or invoice discounting don’t require the levels of security that banks demand as the outstanding sales invoices provide the security. In most circumstances only those businesses with adverse credit or out of the ordinary trading circumstances see otherwise. Furthermore, factoring finance providers will also assume a level of credit control management in securing payment for your outstanding invoices, giving you more time to manage the business in such a fragile and time intensive stage of its life cycle.

There are many different factoring and invoice finance companies available to start-ups and in our opinion (based on 30 years of experience) it is relatively simple to select the best one. A good factoring broker such as Factoring Finance will be able to point you in the right direction and find the best provider and the best deal to suit your needs and many professionals in the commercial finance community will argue that an independent factoring company is better placed to provide such a service.

For more info on invoice discounting and invoice factoring or a quote on the best deals from numerous small business finance providers, pick up the phone or use our ‘Am I eligible’ tool via the site for further details.

Factoring Finance has a UK wide, independent broker network able to source the best deal for you and as such, we are not tied to any one provider, or bank!

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