Invoice finance is surprisingly cost effective; charges and fees are extremely
competitive with many lenders providing low rates for specific industries. The
main fees and charges are explained below and can vary from funder to funder depending
on how each business is evaluated by the invoice finance company.
Service Charge - A service charge covers the
cost of operating an account and it can be varied depending whether additional
services such as bad debt protection and credit control are included within an
arrangement. The service charge is applied to your account on a monthly basis
subject to the value of invoices entered into the facility each month and is normally
subject to a monthly minimum threshold. The service charge percentage applied is
fixed for the duration of the initial term of the agreement.
Discount Fee - This is applied to an account
like a rate of interest applied to an overdraft facility and is usually charged
as a percentage over base rate. The discount fee is therefore variable as it is
subject to change in line with movements to base rates. Hence it is important
to ensure you understand which particular base rate is being applied as it may
not necessarily be that of the Bank of England.
Arrangement Fee - An arrangement fee also known as an admin fee or set-up fee
is a one off charge made by the invoice finance company to put a facility in place.
Legal Fees - These cover the costs of putting
the appropriate security in place for the lender and will include the registration
of a charge in favour of the invoice finance company at Companies House.
Re-factoring Charge - Your invoice finance agreement will indicate the length
of time a lender will advance you funds against an outstanding invoice. This will
normally be 90 days to 120 days. In the event your customer fails to settle payment
within this time frame, the lender will apply a re-factoring charge to the invoice
Disbursements - These may be applied if additional
fees are incurred by the invoice finance company due to bounced cheques, additional
credit searches or same day cash transfers. These are always explained to clients
in advance so companies have the opportunity to keep them to a minimum.
All costs are rolled into the drawn funds balance so it operates like an overdraft
on a current account held with the invoice finance company. The process could
not be simpler or more transparent. The use of invoice finance solutions has assisted
many businesses who required an urgent injection of funds to help them with their
business plans and resolved long standing cash flow problems
in just 24 hours.
To discuss how Intelligent Factoring Solutions can assist you to find the most
suitable and competitively priced invoice finance facility for your business,
call us today on 01753 888 737.