Now that you have decided that an invoice finance facility is for your business, how do you go about selecting the right provider? We have put together a list of criteria that should form part of your consideration.
In the world of invoice finance, there are generally 2 facility types; Disclosed and Confidential.
A disclosed facility is where all parties (i.e., your business, the financier, and your customer) are fully aware of the financing arrangement and your customer agrees to pay the financier for the invoices you issue going forward. The interest rate in a disclosed facility is generally lower as the financier receives invoice payments directly from your customer.
On the other hand, a confidential facility is when your end customer is not notified of the invoice finance facility arrangement. A confidential facility is deemed higher risk which means interest rates will be higher.
Ask your selected providers if they offer both facility types to give you more flexibility.
Does your business issue invoices only in local currency or do you also issue invoices in foreign currencies? This will be something you would want to consider when selecting an invoice finance provider as you may wish to obtain funding against the actual currency of the invoice to avoid FX risk.
At InvoiceInterchange, we can fund customers in SGD and USD. Talk to one of our team members to find out more.
Local & Overseas Debtors
Not every invoice finance provider will accept invoices that are issued to overseas customers. If you do have existing overseas clients or are planning to sell to one in the future, ensure the invoice finance facility will be able to finance overseas invoices as well.
Credit Limit and Fees
A bigger credit limit gives you the peace of mind that there is additional cash available for your business to tap into as and when needed.
However, you may have to pay a higher upfront facility establishment fee as such fees are usually a function of your facility limit. The finance provider may also charge a minimum utilisation fee, monthly facility fees, or any other fees that might be linked to your credit limit. Therefore it is prudent to compare all fees between different providers, and not just the interest rate alone.
Submitting an application for invoice finance should not be a complicated nor lengthy process. At InvoiceInterchange, you can easily submit an online application that can be completed whenever and wherever. Our platform is also fully integrated with the Xero accounting platform, which means you can obtain a facility pre-approval within minutes instead of weeks.
How easy is it for your business to receive support from your financier whenever your business funding needs change?
At InvoiceInterchange, you will be supported by our team throughout your financing journey with us, from onboarding, drawdowns, settlement, and any other ad-hoc activities. You will not need to liaise with multiple departments or make long phone calls to get your questions answered. We take the time to truly understand your financial needs and will structure a product in the way that best caters to your unique cash flow requirements.
Credit Limit Revisions
With the right finance partner, your invoice facility size will grow with your business. Make sure there is a clear process in place defining when and how your credit limit will be revised. It is best to select a provider that can support your business through thick and thin.
Now that you are now aware of the important criteria for selecting an invoice finance provider, let’s get started!