What do lenders look for?
In order for your business to attract the best possible rates and terms on offer for an invoice finance agreement, banks and other financial institutions need an organisation to be able to demonstrate a few key characteristics, these include:
- A 'sell and forget' product type. The best rates for invoice finance are reserved for businesses that offer a product or service that once the product has been shipped / or the service performed, there is no recourse to the seller. Any of the following characteristics of trading including long periods of warranty offered on products, an element of sale or return arrangements and highly contractual business are all likely to either increase the cost of invoice finance or even deem it unsuitable as a form of finance.
- Good House Keeping. CCJs, late accounts, regular changes of Directors, PO Box Registered Offices and nominee shareholders do not provide comfort to a lender. It is vital that all statutory paperwork is kept up to date and that internal documents such as delivery note and credit note files are properly maintained.
- Regular Financial Updates. Any bank or other financial institution providing invoice finance will expect to see regular management accounts. At the very least these will be required on a quarterly basis, but often this extends to the provision of monthly management accounts.
- A reliable and sound management team. For invoice discounting, a strong credit controller is a pre-requisite to a facility being granted.
- An up to date financial accounting package. Lenders tend not to like bespoke accounting packages, as their auditors need to understand the workings of the accounting package, when they complete their regular audits. SAGE is the most recognised and used accounting package in the UK.