Who Is Eligible for Invoice Finance?

Invoice finance is a growing trend in the business world. It helps to improve cash flow and to take away a company's day-to-day efforts on collecting payments and dealing with bad debts incurred by clients. However, not all businesses are suitable for invoice finance services. What makes a business suitable for this type of programme?

As with banks, the requirements and specifications made by factoring companies vary from place to place. This is true if the factor is part of a bank or other major institution, independent, or working as a brokering service. Not all factoring companies agree on what is acceptable risk.

What makes a borrower suitable for invoice finance? Factors typically look at certain things to decide if the borrower is worth the risk. For example, many factors will not lend to retailers. Businesses must have an annual sales total of at least £50,000 to be deemed eligible. Some factors will lend to smaller companies, even start-ups. The business must have a certain amount of customers with little turnover. Clients, as well as borrowers, must prove credit worthiness. The customer must also agree to the terms and conditions of the agreement.

A borrower may not be suitable if it has too many small invoices, supplies sales and service to the public rather than to commercial clients, is plagued by disputes and inquiries, allows customers to make partial payments, or does not have a reasonable credit score. If however you don't have any of these issues then you could be able to use factoring services.

Sylvia is a business consultant with over a decade of experience streamlining business for cost savings. She writes about invoice finance to help companies raise cash.