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Taking Control of Cash Flow – The Selective Invoice Finance Solution

By Malcolm Piper, Managing Director, Tandem Invoice Finance
Securing finance remains a daily struggle for many businesses. With economic uncertainty continuing, and banks and traditional lenders still refusing many overdraft and loan requests, business owners are being forced to seek other ways of funding company operations and expansions. Malcolm Piper, Managing Director, at Tandem Invoice Finance Ltd, explains how modern forms of financing are helping many companies get their cash flow back on track.Malcolm Piper

It is clear that when it comes to finance, many companies are facing a dead end. Recent statistics published by The Ernst & Young Item Club indicate that business bank lending is at its lowest level since 2006. Other surveys support this, with associations including the Office for National Statistics and the Federation of Small Businesses reporting that the number of business loans being rejected has jumped from 11% to 38% between 2005 and 2012.

Despite this grim situation, the fact remains that companies need access to finance for a number of reasons, whether it be for daily business demands (such as paying bills or staff), or more complex investment needs such as expansion or development projects. In short, managing cash flow is the overriding factor to the success of every company, large or small. With traditional forms of business financing off the table, companies are being forced into finding other ways of securing cash flow.

The good news is that modern financing solutions can hold the key. Newer, more innovative solutions are providing flexible and transparent forms of finance. In particular, asset-based finance is helping the lending market become much more diverse, and all signs point to the fact that the number of companies using invoice financing is set to rise.

Invoice finance is a simple premise. It enables organisations to quickly access cash that is tied up in outstanding invoices, saving the supplier the inevitable wait to secure funds from their customer. It is true that invoice finance has not enjoyed an altogether positive position in the lending market. For example, in the past the only option available was for companies to hand over their entire debtor book, relinquish control over client relationships, to tie themselves into lengthy contracts or face high charges for securing funding in this way. The upshot was that invoice financing was, to a certain extent, seen as the last port of call and used by companies desperate for cash.

Times have changed and recent innovations have modernised invoice finance to ensure that it delivers far greater flexibility to businesses with a range of new options, such as selective invoice finance. As a result, the latest innovations are challenging these long-held beliefs and the perception of this form of lending is far more positive.

Looking at selective invoice finance in a little more detail, this works via a one-off approach –allowing companies to choose individual invoices to be financed on an ‘as needed’ basis. In essence it provides organisations with immediate access to capital on an invoice-by-invoice basis without the burden of a long‐term contract. The facility issued as required, employed only when a business needs a boost to cash flow. In addition, fees are only charged when funds are in use – so there is no ongoing financial burden to consider. The relationship between supplier and customer is also honoured and protected, allowing companies to increase cash flow while better handling client relationships and client debt.

These benefits are helping many companies to understand the role which selective invoice finance can play in helping develop a secure, stable and profitable business. What is clear is that traditional forms of lending remain difficult to secure for the foreseeable future. Even when economic conditions begin to improve, working capital will remain short and banks and lenders will continue to be hesitant to offer credit, overdrafts or loans to all but the most trusted and secure of business customers.

So perhaps those of us in the business community should look on the challenging market conditions more positively. They have forced many to seek alternative ways to better manage cash flow, and ultimately encourage the lending market to create more innovative solutions, which better serve the needs of companies by providing more flexible options, which can be used when required.

In conclusion, the business case for asset-based financing is always strong, and solutions such as selective invoice financing are relevant not just when times are tough. Advice from independent and specialist invoice finance brokers, who are registered with the National Association of Commercial Finance Brokers, will ensure that the right invoice finance solution is always identified and utilised.