Getting fast access to cash when payments are late and the banks let you down

One of the fundamental issues facing a courier / logistics business is the lack of cash flow caused by what are often huge delays in receiving payments following the completion of work.

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So how to keep a positive cash flow balance when there continues to be a downward trend of net bank lending to small and medium sized businesses – a drop of £1.4billion in the last quarter alone?

Logistics companies may have tangible evidence of transactions often in the form of delivery notes, but this doesn’t always equate to simple access to business finance through the banks.

Invoice financing can provide the flexible solution. The proof of debt that companies carry is a valuable asset that can be utilised to gain financing. It is a way of generating cash that uses outstanding invoices as the principal asset against which money can be raised, providing companies with up to 95% of the value of invoices within 24 hours of their creation.

The cash that can be obtained can be as much as four times the cash a company would get from a bank loan or an overdraft facility, which can be used to cover operating costs and wages, or even to expand the business.

Invoice Financing usually comes in two different forms known as Factoring and Invoice Discounting:

Factoring – if a company does not already have an established credit control facility then the lender can take charge of receiving and chasing payments from customers. It is suited to companies with an annual turnover of more than £35,000.

Invoice Discounting – Similar to a factoring facility, but with one major difference – the company is in charge of the credit control facility. It is suited to companies with an established credit collection administration process and an annual turnover of more than £150,000.

What are the benefits of Invoice Financing?

• Requires less red tape and historical data compared to applications for more traditional forms of finance, such as bank loans and overdrafts. It is funded against the sales ledger and gives a company fast access to cash.

• Immediate Cash Injection means that a company can get access to cash based on invoices before they are paid.

“If a logistics company needs an immediate injection of cash, and it can’t get funding from the banks, then we would recommend invoice financing,” says Simon Carter, Director Touch Financial. “An invoice finance package advances a company a percentage of an invoice a company has yet to be paid for. It means that a company does not have to wait for the customer to cough up the cash, which in the case of a logistics company can be 120 days or even more.

The bottom line is that Invoice Financing allows a logistics company to plan its finances in advance, giving it the opportunity to plan ahead based on the sales ledger.

Touch Financial Support

www.touchfinancial.co.uk