How to Get Ahead With Your Debtors…

Every small business in the country will have experienced late payments at one time or another.  Fortunately, the issue is often short lived with customers paying up after a gentle prompt, however sometimes customers operate to different payment terms or may delay payment due to their own business issues which can have a negative impact on the cash-flow of the supplying business.

Any delays to payment can be hugely frustrating and have a negative impact on a business.  In the past, businesses may have approached their bank to extend their credit facilities or for a loan, however today more companies are turning to alterative lenders who are able to offer a broader range of funding options, with flexible and bespoke solutions to their individual needs exemplified by the Invoice Discount or Factoring facility.

Statistics from the Asset Based Finance Association suggest that alternative lenders are providing more funding to SMEs than ever before. In the first quarter of this year alone, SMEs raised £711m from the sector according to the ABFA, a 60% increase on the same period of 2015. The sector’s total lending to SMEs now stands at £19.3bn.

The increasing use of other types of business finance reflects a heightened awareness amongst SMEs that they do have funding options other than what’s available from the banks, with research suggesting that more than 75% of SME CEOs are now aware of options beyond traditional banking.

Industry data suggests that this is feeding through into take-up, for example, 12% of SMEs are already using invoice finance, while a further 46% say they would consider doing so if and when they need to raise finance.

The reasons that invoice financing are proving to be so popular is the speed in which they can achieve access to funds as well as the cheaper cost of funding and its simplicity. Additionally, the stress and time consuming nature of chasing payments from your debtors is taken over by the Invoice Finance provider, either on your behalf, or confidentially.

In fact, in most cases, PFC’s client that have taken up Invoice Finance facilities, often see a significant increase in turnover and profitability as they are given the chance to concentrate on growing the business and not chasing payments or dealing with extended payment days.

For these and other reasons, the Federation of Small Business and the British Chambers of Commerce have been keen to promote the option as one of the diverse range of financing options.

With uncertain times ahead and much change forecast for the economy, having access to alternative forms of finance can be the lifeline for many small businesses.  With access to finance and the rise of alternative finance options, let’s hope the frustrations of a small business owner are short-lived.

If you’re looking for access to finance, contact the team and let us discuss the options available to you.

WHAT’S THE SCORE WITH CREDIT RATINGS?

Business owners who believe they have a ‘bad’ or ‘low’ credit rating can be understandably reticent in applying for essential funding. Perhaps they base this on the knowledge their personal credit report is weak, or they suspect their trading performance isn’t perfect.

 

However, although it is fair to say that UK businesses and consumers have experienced a tightening in lending from the high street banks, here at PFC we take a slightly different approach and principally look at the fundamental parts of the finance proposal: purpose, amount, length of time trading, number of owners and the term required.

 

It’s the combination of these factors that create a proposal and when they make ‘sense’ (the purpose is valid and will aid the business, the amount requested is reasonable considering the monthly revenue income for the company, historic trading patterns, number of equity owners to reduce the lend/risk ratio, and finally a repayment term that is sensible and matches the purpose) they can outweigh the credit scoring condition.

 

Unlike many lenders who use faceless algorithms to make lending decisions, at PFC we work with a panel of more than 30 lenders and examine what are a company’s or individual’s needs and what information do we need to help us make an informed decision.

 

We also speak directly with our clients to get an understanding of their personal situation and explore many different routes to finance that will match their needs and circumstances.  For example, a client may come in asking for a loan as they are needing money to expand their business or to help with cash flow at certain times of the financial year.

 

By having an understanding of a client’s business or their circumstances helps us find alternative routes to finance for them. As such, we may be able to secure finance against an unpaid purchase order or even existing assets within a business that could help release capital for growth rather than just take a traditional ‘business loan’ route.

 

Working with the information we have from the business or individual we are then able to approach our panel of lenders and find the right package for them, pulling in specialist finance houses when required.

 

So, if you are looking to access finance but are worried your credit score isn’t good enough, why not try PFC and see what we can do for you?