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Incisive Business Guide To Single Invoice Finance

Single Invoice Finance (Or Spot Factoring) Buyers Guide

This guide from Incisive Business outlines the features and benefits for your business from using single invoice finance services.

Single invoice finance can be used as an alternative to factoring or invoice discounting.

What is Single Invoice Finance?

Single invoice finance, also known as Single Invoice Funding, Selective Invoice Finance or Spot Factoring, is similar to factoring in that a business can use debtor's invoices (the sales ledger) as assets.  The business uses these assets to raise finance against the value of its invoices.  Unlike factoring, single invoice finance facilities will be offered on an invoice-by-invoice basis and consequently can be used as frequently or infrequently as the business requires.

Single invoice finance gives a company greater control over their business working capital requirements.  Where a business wins a new client but requires additional materials to fulfil the order or where they find an opportunity to purchase new machinery or equipment which would greatly benefit the business but they don't have enough finance readily available - then single invoice finance can be used to provide that immediate cash injection to help make the most of these opportunities.  Additionally where a business is faced with an unexpected bill, such as VAT, Corporation Tax or simply repairs to equipment, single invoice finance may be the ideal solution.

Single invoice finance gives a business quick and straightforward access to funds on a short-term basis and has flexible terms.  Once a facility has been set up with a single invoice finance company the business will only pay when the service used.

How Can Single Invoice Finance Benefit A Company?

Quick access to capital

Single invoice finance is a simple and fast process, which enable a business to get immediate access to working capital when they need it most.

No long-term commitment

Unlike with factoring; single invoice finance does not require the business to commit the whole sales ledger into the contract.  Where finance is obtained using single invoice finance, once the customer has paid there's no further financial commitment between the business and the invoice finance company.  However the single invoice finance facility remains in place and can be quickly used again should the company wish to raise finance again at a later date.

The importance of customer relationships

When using single invoice finance the business is responsible for collecting the invoice values.  This helps maintain the relationship between the business and its customer while ensuring that the agreed invoice finance facility is confidential between the business and the single invoice finance facilitator.

Part of a financial portfolio for business finance

Single invoice finance can be used in conjunction with other facilities already in place, including lending and overdraft facilities, but with the knowledge that it can be switched on and off, as cash flow requirements change, with no additional costs incurred when it's not being used.

How Single Invoice Finance Works

Once the single invoice finance facility has been agreed and the facility is in place, a new bank account is set up by the invoice finance facilitator in the name of the business.

The Single Invoice Finance Process

1.  An invoice is raised by the business as usual and sent to the customer. The invoice will have the payment details of the new bank account.

2.  The single invoice finance company will confirm that the relevant products or service has been provided to the customer.

3.  The single invoice finance provider will then advance the agreed percentage of the invoice value.  The percentage agreed will vary depending on various criteria which will be discussed when setting up the facility.  The criteria will include the credit worthiness of the business' customers.  It is important to note that not all invoices will be eligible for single invoice finance and it is vital to clarify what invoices the business can and can't submit for finance.

4.  When the invoice is due the business will use their own internal credit management process to contact the customer to ensure the invoice is paid on time.  Some single invoice finance companies can offer assistance if the business has difficulties collecting and this is something that should be discussed when setting up the facility.

5.  The customer pays the invoice directly into the new bank account set up by the single invoice finance facilitator

6.  Based on the amount paid by the customer, the single invoice finance company will debit the original advance and together with the fees agreed and the remaining balance is paid back to the business.

Single Invoice Finance - An Example.

The business receiving single invoice finance issues an invoice to their customer with new bank details as set-up in the finance agreement:

Invoice value = £1,000

The single invoice finance company pays 80% to the business' existing (old) bank account:

Payment = £800

Customer pays the invoice into the new bank account: Customer payment = £1,000

Single invoice finance company debits initial advance from the new banks account: Advance reclaimed = (£800 + Fees [e.g. £100]) = £900

Balance of £100 is then paid back to the business and into the old bank account.


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