Category Archives: financing

Ending Single Invoice Finance Misconceptions for Good

How To End Single Invoice Finance Misconceptions

Single Invoice Finance single-invoice-financecomes in two forms namely factoring and discounting. Both methods have become superstars in the world of finance and have been two of the most sought after among business owners and entrepreneurs alike. However despite their popularity and widespread use, a good number of misconceptions still continue to hunt them. That’s bound to end today as we lay down the facts from the fallacies with this list.

The Misconception“It’s another form of debt.”

Of all the lies and misconceptions about single invoice finance, this is perhaps the most rampant. It’s not that surprising given that a good majority of financial options in the market fall under the category of credit. Just keep in mind that this one begs to differ as it is an asset transaction. It generates funds by virtue of advancing the value of an invoice, one that is yet to mature and yet to be paid at a future date. In the books, it appears as a decrease in trade receivables coupled by an increase in cash.

The Misconception“It’s only for the established entities.”

Most small to medium scale enterprises, recovering entities and startup companies often shy out of trying to finance their endeavors with the help of financial providers thinking that their application will get rejected anyway. The good news is, single invoice finance is no debt thus it comes without interest and collateral. Even the smallest and youngest entrepreneurs can apply for it because it has no asset level requirements. This makes it faster to process too. Plus in terms of creditworthiness, providers need that of the customer’s to whom the invoice is attached to not the company’s.

The Misconception“Receivable value is lost in the process.”

Let’s review the process. First, the provider gives the company an advance of the chosen invoice’s value even before the owing customer pays for it. The amount is equivalent to at least eighty percent and as much as ninety-five percent of the total value. The remainder shall only be released and forwarded to the company once the customer has paid in full which is decreased by a predetermined fee.

The Misconception“It’s expensive.”

As previously mentioned, single invoice finance only involves a predetermined fee which is agreed by both parties at the onset. Moreover, since this is a onetime transaction the fee also happens once. There are no lengthy contracts and obligations involved.

What is invoice finance?

More on invoice finance at http://workingcapitalpartners.com.

How and Why Export Finance Works

Exporting-financeBusiness, as it is, is not an easy venture. It takes a lot of dedication, hard work, finances and of course guts. If opening up shop domestically is already a massive undertaking, imagine how magnified everything becomes when we think internationally. Exportation both frightens and excites an entrepreneur. But to us, it’s not something to be scared of especially when we’ve got export finance to back us up.

To a lot of people, export finance is something new and foreign. But given its perks and benefits, you’d be at a disadvantage if you never get to hear about it and we’re here to fix that.

By definition, export finance is the method by which companies get to trade internationally without the usual burdens of documentation and threats to collections and liquidity. This is done by selling the rights to collect against export sales invoices in exchange for an advance of their value to be received earlier than their maturity.

Majority of sales transactions happen on credit. If you look at your accounting books, you’ll realize that sales occur either on cash or on credit. With foreign trade, majority of importers opt to defer payment. This means that they shall withhold payment until a set maturity date which is oftentimes the time by which the goods are received or when they have been resold.

The very reason why many businesses find it useful is because it helps avoid issues with collection and liquidity. International trade means additional administrative costs and the need to fine tune certain processes to comply with the culture and laws of a specific country or territory. Additionally, export finance providers tackle the administrative requirements in terms of collection which saves the company both time and resources.

Moreover because it speeds up the collection process, the level of cash inflows grows as sales increase. This alone strengthens working capital and improves the entity’s state of liquidity and solvency. The process even helps minimize if not completely avoid financial risks namely credit, foreign currency and interest rate risks.

Overall, export finance help business entities who wish to take advantage of the opportunities presented by the world market. By cutting down and removing factors that present risks or negate benefits, it allows even the smaller companies to venture further. Even startups can make use of it as it does not have the strict requirements and application process that most funding methods and institutions require.


Learn more at workingcapitalpartners.com

Mistakes in the Use of Single Invoice Discounting

single invoice financeSID, an acronym for Single Invoice Discounting, is a one-off transaction that involves the use of a particular and selected sales invoice to raise funds for commercial use. Many businesses make use of it given its numerous advantages, however, not everyone who does do it right. Today we shall discuss these blunders and hopefully help everyone avoid committing the said crimes.

But before we proceed, let’s get to know SID even more. Also known as Selective or Spot Invoice Discounting, it allows companies to advance the value of its sales invoice by up to a percentage majority of its value before the owing customer sends in payment. This happens almost instantaneously as many providers are able to release cash within twenty four hours at the least.

In such transaction, the company chooses the invoice and then uses it as collateral. The amount of the advance received shall depend on the value of the said invoice. The company then uses the funds as it pleases and then collects from the owing customer. Once collection is completed, the company has to repay the provider for the advance it has previously taken plus fees agreed upon at the onset of the transaction.

Now that we’ve got that covered, let’s proceed to the crimes committed against SID.

Mistake #1: Mistaking it for factoring. – Discounting and factoring are two distinct financing methods despite their very similar benefits. Factoring is a sale of the right to collect against the invoice with the collection burden shouldered by the provider and not the company.

Mistake #2: Contacting the wrong provider. – It is important to transact only with trusted SID companies to ensure that things go smooth and well. This necessitates ample research and going around to narrow down choices and then end up with the best.

Mistake #3: Failing to assess the invoice beforehand. – SID providers bank on customer instead of company creditworthiness. To cut the application time, make sure that you only use of credible and creditworthy customer sales invoices. This brings us to our next item.

Mistake #4: Don’t extend credit to everyone. – To make better value for your receivables, extend credit sales only to those who are capable of fulfilling their obligations. Screen your customers first before you allow them of deferred payment options. This benefits not only your Single Invoice Discounting transaction but your cash flows, receivables ageing and liquidity as a whole.

 See professional advice, visit http://workingcapitalpartners.co.uk.

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A Step by Step Guide to Invoice Financing

steps for invoice financingInvoice financing has fast become one of the most popular and in demand ways of raising the needed resources or capital among entrepreneurs today. It’s charm lies in the truth that it does not create the same consequences as that of bank loans and other forms of credit. As a matter of fact, it does not appear as a liability in one’s financial statements either. So exactly how does invoice financing work? Read on to find out.

Per definition, single invoice financing is a form of short term borrowing that allows an entity to draw cash against its sales invoices before the customer has sent in partial or full payment. Let’s take it step by step.

  • First, the entity chooses which invoices it will subject to the financing and when. The company will have to decide whether it prefers complete or single invoice finance. In the case of the former, all customer receivables will be subjected to the service for every period, often on a monthly basis, for a specific period of time. The latter on the other hand is individual in nature so the company gets to handpick which invoice it would like to use as well as how often they would like to do so. The choice is often directed to those receivables that have significant values or those that pose threats of un-collection.
  • Second, it sells the right to collect against the chosen invoices to the provider. The reason why this financing method does not fall under the category of a debt is because it is in fact a sale of an asset. The right to collect is passed on from the company to the financial provider. The latter provides an amount that is at least eighty percent equivalent to the value of the invoice/s with the balance to be forwarded after full collection from customers is achieved.
  • Third, collection is performed by the provider and the company uses the funds as deemed necessary. The financial provider now bears the responsibility of collection. In some agreements should a customer default in payment, the loss is borne by the financing company. This allows for reduction in losses from bad debts.
  • Fourth, once collection is completed the balance is then forwarded. After collection from customers, the invoice financing company will now forward the remaining balance less fees to the company.


Do you need invoice financing? Visit workingcapitalpartners.co.uk

Working Capital Partners on What is Receivables Financing

Receivables financing is one method used by a number of companies around the globe in order to draw out their needed funds. As its name suggests, the cash is driven from the entity’s own receivables. To some, this may still sound foreign but it has in fact already existed for years now. But what is it really and how does it work? Working Capital Partners is here to explain to us exactly that.

In receivables financing, companies actually hasten up the conversion or recognition of cash. Sales happen on credit and with this come the presence of customer invoices. It could however take time before cash is actually received as payment can come in periodical installments. Such funds may be needed by the entity for various reasons; funding operational expenses would be one. To do this they choose among two options: factoring or discounting.

With factoring, they sell the right to collect against the said invoices to a financial institution called a factor that in turn provides them with up to ninety five percent of the value of the customer invoices. The same proceeds to collect from the owing customers and once such has been completed they then will give the remaining five percent balance less any pre-agreed fees.

On the other hand, discounting is more akin to a loan only without interests and debts. What happens is the company uses the said invoices as collateral getting their value in advance from the financing institution. The company still proceeds in collecting from its owing customers and once this has been completed, they will then repay the financial institution plus nay pre-agreed fees.

To put it simply, it hastens and cuts short the turnover from receivables to cash. Receivables financing, both factoring and discounting also produces the same effects and benefits, to wit:

  1. receivables-financingIt improves the entity’s cash flows thereby moving hand in hand with sales.
  2. It is fairly quick to use for as fast as twenty four hours and does not require the entity to provide financial statements or show their credit history and rate.
  3. Locked up cash is freed and made accessible and available for use especially for emergency cases.
  4. It does not affect the liabilities portion of the financial statements but rather only cause a decrease in trade receivables coupled with an equal increase in cash.

Thanks to Working Capital Partners, all these have been laid out clearly. So what are you planning to use? Factoring, discounting or both?