Invoice finance facilities can grow with a business in several ways, providing increased funding flexibility as the business expands. Here are some common ways in which the facility limit can increase.
Increased Turnover
As a business’s turnover grows, the value of its invoices also increases. Invoice finance facilities are often linked to a percentage of the business’s turnover, so as turnover grows, the facility limit can increase accordingly.
Improved Creditworthiness
As a business establishes a track record of timely invoice payments and overall financial stability, its creditworthiness improves. This can lead to a higher facility limit as the finance provider becomes more confident in the business’s ability to repay.
Adding New Customers
Bringing on new customers can increase the volume of invoices the business generates. Finance providers may adjust the facility limit to accommodate the increased invoice volume.
Longer Payment Terms
If the business negotiates longer payment terms with its customers, it may need additional funding to cover the gap between invoicing and payment. The facility limit can be increased to provide the necessary funding.
Seasonal Variations
Some businesses experience seasonal fluctuations in sales and cash flow. Finance providers may offer flexibility in the facility limit to accommodate these variations, allowing the business to access more funding during peak seasons.
Cross-Selling
If a business uses multiple financial products from the same provider, such as invoice finance and asset-based lending, the provider may increase the facility limit to encourage further business.
Strong Relationship
Building a strong relationship with the finance provider can also lead to an increase in the facility limit. A good track record of communication, transparency, and collaboration can result in a higher level of trust and a willingness from the provider to extend more credit.
Businesses should communicate regularly with their finance providers to discuss their growth plans and funding needs. This can help ensure that the facility limit is adjusted appropriately to support the business’s expansion.
