Wednesday 29 March 2017

Invoice discounting: Grow your business without hiking borrowings

Invoice Finance is a working capital facility based on the level of your trade receivables.

In availing of a credit facility, companies can grow their business without increasing borrowings through more conventional banking products.

Smaller facilities start at around €300,0000 but can be as high as €100m.

As growth can be a double edge sword that may lead to working capital challenges, however, the presence of an Invoice Finance facility can help alleviate any strain.

How does a company apply for this facility?

Putting in place an Invoice Finance line is a broadly similar process to any other financing line from a bank, whereby an application is made by one of our team on a company’s behalf detailing the background, purpose, performance and future prospects of the business. Where the process differs is in the debtor due diligence process – we look at the nature of a company’s relationship with its customers to see that the debt due is “suitable” for financing.

 What types of company’s / debts are suitable for Invoice Finance?

• Companies selling on credit

• Companies with a good spread of debtors, good credit control and management information systems

• Companies that do not invoice on the basis of staged payments

• Companies with a minimum annual turnover of €1,500,000

• Manufacturers, Distributors, Wholesalers and Providers of Services

How does it work?

• Our customers notify us online as to the level of their debtor book with new sales generating 70% to 85% availability on the same day.

• Payment from the debtor is lodge to the bank freeing up the residual 30% - 15% (100% less the advanced amount) less interest and charges that have accrued

Key Customer Benefits

• Improves a company’s liquidity and can help solve cash flow problems

• As sales and debtors grow, so too does the amount of money available to the company

• Completely confidential facility

Derek McDermott is Head of Asset & Commercial Finance at Bank of Ireland Finance

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