Catch 22?
Posted on 13th April 2019 at 15:35
Achieving business success can strain your cashflow, but there is an answer, says Darren Peacock of Peacock Finance
As a seasoned funding expert who’s experienced the highs and lows of running his own businesses, Darren Peacock sees, time and time again, companies caught in what he calls the ‘growth trap’.
The world’s their oyster with more and more orders coming through the door, but to service that they need cash to keep their raw ingredient coming. It’s at this pivotal moment, transitioning from nothing into something, that too many fail, but the littleknown option of ‘invoice financing’ can fill that vital gap and make the difference between success – and, well, not.
Darren, who advises firms of all sizes across the Yorkshire & Humber region is witnessing a buoyant and optimistic market in this area, despite wider economic uncertainty, and is increasingly recommending invoice factoring to help the growing band of startups take it to the next level.
“It’s almost like we have our own business ecosystem in this area,” he said.
“We’re still basking in the optimism created by Hull’s City of Culture status and the unique mixture of positive factors that exist here, like low cost, strong transport links, major global investment and extensive regeneration. All of this means the businesses I see – in sectors like haulage, recruitment, manufacturing, modular buildings and engineering – are determined to carry on regardless, ignoring the uncertainty of Brexit, for example.”
And such businesses approach Darren for help improving their cash flow for a number of reasons.
“Maybe they’re growing so rapidly they need a cash injection to help them buy enough products and materials to supply what their customers want; perhaps they’ve taken just one order but it’s their biggest ever and they need to purchase a part worth a lot of money, or maybe they offer their customers 60-day terms but need to pay their people every 14. Transport businesses, for example, might allow their clients 65 days to pay but have only 14 days to settle their fuel bill.
“Funders are happy to help because they know that invoices owned by reliable, in many cases ‘blue chip’, companies are going to be paid no matter what.”
“Invoice factoring can be the answer. With banks pulling back on their traditional overdraft facilities since the credit crunch, it has gone from being a last resort to a really popular option, because it provides a cost effective, flexible way of keeping the money flowing."
Five benefits of invoice factoring
It’s available to startups – no need for two years of accounts
Rates can be as low as 2%, plus a ‘facility fee’, compared to 6-12% typically for a business loan
Decisions are based on the value of your outstanding invoices and how reliable your debtors are. You could access up to 85% of your outstanding invoice value but you only use, and pay interest on, what you need, for as long as you need it
Many offers come with admin – the provider will pull in your outstanding invoices for you when they come due
Deals come with insurance too, so, if a large debtor defaults, you can ensure you at least recoup your costs, and providers offer online apps and portals that make your invoice factoring facility easy to administer
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