Once you’ve learned about invoice finance and decided that it’s a great way to cover your working capital requirement while also financing growth, all that remains is to choose a provider.
Before you look at individual invoice finance firms, you should decide what kind of finance you want: Do you want to hand over your entire accounts receivable to a company that will then issue and collect your invoices, while providing you with a finance stream? Or do you want a more flexible arrangement that lets you choose which invoices you want to put forward for discounting, and therefore pay less in months where you don’t need to draw down as much cash?
If you want to relinquish control and have your customer accounts managed for you, then a factoring service may be for you. Businesses wishing to manage their own client accounts will appreciate the features of a flexible invoice finance provider like OptiPay.
Five Questions to Ask When Selecting an Invoice Finance Provider
Once you have decided on the kind of cash flow finance that works for you, it’s time to look at individual providers. Naturally, you will want to choose a firm that caters to businesses like yours in terms of size, geographical location and perhaps sector. You should also ask a few questions about the kind of service that the provider offers:
How flexible is this service?
A lot of providers say they are flexible but the degree varies. If you want to keep your fees to a minimum while maximising your options to raise cash at any given time if you need to, then you will want a provider which is happy to scale up its business with you whenever you have invoices ready and need cash to trade and grow. Check the small print and don’t be afraid to ask about specific scenarios which you can imagine might be relevant to your business in the future.
What are the Fees – ALL of them?
Like banks, some invoice finance providers are not above charging extra fees for services theat are integral to the business financing package. These can add up and make a very considerable difference to the total cost of your business finance over a year. Check the small print and ask for confirmation: the cheapest provider might not be who you originally thought. OptiPay, of course, prides itself on having no hidden fees.
How does this provider interact with my clients?
Most invoice finance arrangements will see the provider run some checks on your clients and make occasional contact with them over invoices. Generally, this is done very courteously and professionally, and it is not a problem to clients. You will want that to be the case, so ask each prospective finance provider about how they work and remember to run a search online for reviews – bad experiences by other SMEs will often find their way into the limelight.
What happens if a customer fails to pay?
We have spoken before about recourse vs non-recourse invoice finance. There is also a difference around whether the invoice is truly sold to the financier, or merely used as a kind of security. Most SMEs don’t want to find that a customer has gone bust owing them money, especially if they’ve already spent the cash – so look for suitable insurance as part of the deal or partner with an invoice finance company like OptiPay that offers trade insurance as part of its funding solutions.
How easy is the package to use?
If you want flexible finance, you need to be able to access it easily. A smooth online portal and fast invoice approval system is crucial if you are to reap the advantages of cashflow finance – especially when you most need the money. Have a look at the interface on offer, ask about approval and payment times, advance rates and length of time to get funding versus clearance of funds int the bank account.
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Note: OptiPay funding solutions are only suitable for businesses with annual revenues of $1m+ per annum.
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This is Paul, he is one of the directors of UVS, a labour-hire provider to the construction industry. Here’s what he has to say about how OptiPay was able to help his business grow and succeed. Contact an OptiPay expert today to see how we can help you.
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