11-05-2007
Invoice discounting and factoring for growing businesses
A growing number of firms are experiencing the benefits of invoice discounting and factoring to help finance their business, commercial finance experts have revealed.
According to Mike Scowen, north-west regional director of Lloyds TSB Commercial Finance, the flexibility of funds created by such services means that a business can access cash which is tied up.
"Many businesses keep in place pre-approved facilities so they can rapidly finance a change event, whether it's an acquisition or a new profit generating opportunity," he told the Manchester Evening News.
Fast-growing businesses often find themselves having cash flow problems, especially when the number of orders is growing rapidly and their money is tied up in outstanding invoices.
However, banks are often unwilling to increase overdraft facilities because new firms generally have very limited additional security.
Christian Humphreys, from SHM Smith Hodgkinson, said that finding the appropriate source of funding can be challenging and has the following two pieces of advice for growing businesses:
• Plan your borrowing time line realistically and well in advance.
"Plan in some additional time and allow some contingency for the amount and cost of borrowing for unforeseen events."
• Be patient.
"Some lenders take longer than others to reach a decision, so companies have to make sure they build in plenty of time before they actually need the funding to allow for this."
(c) Adfero Ltd 2007
