Is Invoice Finance a Credible Alternative to Bank Loans?

Invoice finance (IF) is not considered a credible source of finance among some business owners because of its relatively high cost and onerous terms. Is this perception justified? I will argue it is not with the introduction of single invoice finance.

What is invoice finance?

It is the sale of a company’s sales ledger for cash providing an ongoing source of cash as invoices are issued to customers by the company. The company might retain the collection of cash or transfer this and the associated credit risk, to the funder.

Some conventional IF facilities can impose numerous types of fees and charges, and require security and a commitment from the company to sell the its entire sales ledger to the finance company.

Some companies offer a refreshing financial alternative, offering to buy just a single invoice and charging as few as just one fee and generally offering a more flexible funding alternative.

What is single invoice finance?

As its name suggests, it is the purchase of one invoice for cash from a company. The company does not need to sell any further invoices so single invoice finance can be used by companies to raise cash as they need it. Also, they might not need to provide security such as a debenture or a personal guarantee.

Single or multiple IF are effective tools for cash management because they liquidate illiquid assets i.e., they convert debtors into cash. The cash realised can be reinvested by the company in profitable projects or used to pay back expensive debt.

Some borrowers might argue that on an annualised basis, the cost of invoice finance is high compared to a conventional loan. That comparison is like comparing apples to oranges because the two financing instruments work differently. A loan is a continuous source of finance whereas single invoice finance is discrete – providing finance for up to 90 days or less. Annualisation of the cost of invoice finance is not therefore consistent with its use.

Though the interest rate on a loan might look relatively attractive, the cost of arranging and administering it must also be factored in, such as the arrangement, commitment, non-utilisation, and exit fees, plus servicing charges and legal costs of documentation. There might also be costs to pursue and recover bad debts, or to pay for credit protection. Invoice finance has its own arrangement and administration costs that might be more or less than a bank loan.

Invoice finance is therefore a credible alternative to a loan because:

  • it converts a company’s debtors into cash that may then be reinvested to potentially generate positive return for the company.
  • the company can transfer debtor credit risk.
  • it avoids using up a bank’s limited credit capacity for a company and
  • it diversifies the company’s sources of funds so reducing its reliance on the banking sector.
  • companies can use it to raise cash as needed
  • security might not be needed
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Finance Company Car Insurance – Tips To Help You Find Insurance As Cheap As Possible

Using a finance company for car insurance is usually very difficult, because companies generally won’t provide loans for something that doesn’t bring a return on investment, at least if you haven’t proven in the past you can pay off loans. Obtaining a loan to pay off your car insurance is virtually impossible, unless you can prove beyond the shadow of a doubt you are able to pay it off.

While finding a finance company for your car insurance may not be easy, obtaining car insurance at a reasonable rate certainly is not impossible. Hopefully these tips will help you in your quest to get cheap car insurance.

As car insurance is a necessity in today’s day and age, the amount of people searching for cheap car insurance is on the rise. This is why there are so many online based companies today offering car insurance at dirt cheap prices. However, just because a policy is cheap doesn’t make it right for you.

In fact, often times these types of car insurance polices provide very little protection at all, despite their affordability (and perhaps because of it). Therefore, it certainly is necessary to do your research and get your insurance policy with a well respected company that has many satisfied customers. While you may end up paying more for such a service, the end result will be well worth it.

First of all, consider the kind of car you are driving; this will make a huge difference in the amount of money you need to fork over for your car insurance policy. Quite simply, a Ferrari will cost you a lot more than a Chevy Cavalier, because they are much faster and therefore tend to attract divers who are more accident prone. Also, they are much more highly targeted by thieves.

The most important step is to do your research and find out which car insurance company is the cheapest for your particular situation. This will probably be different for every person, depending on their individual situation and factors. Get started today; remember that you don’t need a finance company for car insurance. Get your insurance cheap by utilizing these tips.

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