Selective Invoice Finance: Choosing Which Invoices to Finance

Article provided by our friends at Contact Business Finance

Introduction

Many business owners in industries such as recruitment, construction and manufacturing have heard of invoice finance but hold the assumption that every single debtor and invoice must be included. This is not the case – selective finance is a type of invoice finance facility where you have the ability to pick and choose exactly which debtors and invoices you wish to receive funding against.

How does it work?

Also known as spot factoring, selective finance gives you the option to pick and choose exactly which debtors and invoices you want to put through. Lenders that offer selective invoice finance usually have a portal that you can upload your invoices onto. After the lender has received your invoices, they verify it with your client. Following verification of the invoice, the lender can release up to 90% of the invoice value which you are then able to access. The percentage value you receive depends on the industry you are in. Once your client has paid their invoice, you will receive the remaining 10% minus the lender’s fees.

The advantages of selective invoice finance

The main benefit to the selective invoice finance option is the flexibility. With every other facility type it is all debtors and invoices that are included – but we understand that this might not be the most suitable option for you and your business.

Another positive to selective finance is that in most cases lenders do not charge a monthly minimum fee. This means that there is no minimum value in invoices that you must put through the facility each month. This takes the pressure off knowing there will be a fee if you do not meet the requirement.

Selective invoice finance facilities are perfect for that short-term cash injection – it is a cost-effective way to raise those much-needed funds, as opposed to an expensive loan. It might be that you include just one client in the facility and raising the cash from their invoices gives you enough working capital to trade efficiently and grow your business.

Things to consider

As with any form of invoice or business finance, having a selective finance facility does not come for free. Selective invoice finance lenders often charge more in fees per invoice in comparison to other traditional invoice finance facilities such as factoring or discounting. The reason for this is that the lender does not have access to the whole of your debtor book as security.

One other consideration is that invoice finance lender must verify your invoices before you are able to access the funds. This does not usually have a large impact on timescale, but it is important to be aware of the process.

What should I do next?

If you think that selective invoice finance is a suitable solution for your business, don’t hesitate to contact us. Contact Business Finance are a commercial finance brokerage based in Wolverhampton, West Midlands. We are invoice finance specialists and help businesses in a variety of industries find the most suitable lender for their business and needs.

The way we work with you is simple – we set up a 15-minute call to discuss you, your business and what you are looking for in terms of invoice or business finance. We then, using our specialist knowledge, go out to the whole market to help you find the best option. We will be with you every step of the way and can answer any questions you have throughout the process.