What to Consider When Comparing Invoice Financing Solutions

While invoice finance won’t be right for everyone, what’s clear is that it can be a simple, transparent solution to funding your business by activating the cash that is tied up your trade receivables (those as yet unpaid invoices), rather than extending your borrowing.

Compared to the cost, complexity and risk attached to extending your company borrowings, invoice finance can be a very strong candidate, however, when it comes to looking for the right provider, it can be a bit of a minefield to navigate.

We want to share our tips on the six things to take into account when considering invoice finance for your business:

1. What will it really cost?

Can the provider give you an honest assessment of what the actual, per invoice funded cost will be and present it in a way that’s simple and clear to understand? We believe that invoice finance can be a really powerful tool, but only when you know exactly where you stand. Look out for fees ‘starting from’ or fees as scaled percentages with small print outlining the extras and conditions. If it’s complicated and difficult to understand, it could be a red flag that the ‘quote’ you receive is unlikely to be what you actually end up paying to fund your invoice(s).

Are you having to pay listing fees on top of charges for each invoice? Is credit insurance an optional extra or is it included in the price?

At Hydr, the fee we quote is the fee you pay – always. You will never be charged any hidden extras, our fees are fixed, fair and inclusive of credit insurance. Take a look at our handy invoice factoring calculator here.

2. What percentage of the invoice value is paid upfront?

Some providers will fund 70-90% up front with the remaining balance topped up when the invoice is paid by the debtor. This means you still have to wait out the payment terms to receive the full invoice amount, and the longer your debtor takes to pay, the more you will be charged for that particular invoice which means that the amount you actually receive gets smaller day by day.

For Hydr customers, this just isn’t good enough. We will always pay 100% of the value of your invoice within 24 hours. There’s no catch, no smoke and mirrors. Just full payment, minus our fairly priced, fixed fee in your bank account within 24 hours. We don’t like the complexity of working out the remaining balance any more than you like waiting for it.

3. Are they committing your business to a fixed-term contract with a monthly subscription?

One of the key benefits of selective debtor finance – done well – is that it is a flexible solution to optimise your cash flow. It’s therefore important to look out for the providers who will demand a certain time commitment or volume of invoices from you – this might not fit your needs. Think very carefully before you consider a whole turnover agreement: these take time to apply for, can be quite costly and you will be locked in to a contract for at least a year, if not longer. That’s a fixed cost every month, just to have the facility. Are you really going to use all of it?

At Hydr, we do not lock you to lengthy agreements, enabling you to switch us on or off as you need. You can fund as many or as few invoices as you like – all for a fair, fixed fee and payment in your account within 24 hours. Have a look at our handy calculator to give you a sense of our fees before you start onboarding.

4. How long does onboarding really take and what paperwork do they ask you to provide?

Hefty admin requirements and paperwork have put a lot of businesses off even exploring invoice finance as an option, so make sure you look at what’s involved to onboard with the provider. The good news is that technology has revolutionised the way we do business and its impact on invoice finance is a really positive one.

Our technology and class-leading Xero integration mean that the complexity that once existed isn’t there anymore. Onboarding takes 15 minutes and is quick, seamless and because our fees are fixed, it’s transparent too. You do not need to submit any additional paperwork, just get online and follow the onboarding steps.

We offer a complete technology integration; once onboarded you simply raise your invoices within Xero as you always do. We then fund them and park them in the right place within your Xero accounts. Then, when we are paid, we enable a seamless, effortless reconciliation. You can always log in to our customer dashboard but by just by logging into your Xero, you’ll always be able to see what is going on.

5. What charges and debentures do they take over your business?

Some providers will insist they take a charge on your business and perhaps ask you to commit to a personal guarantee. Consider carefully the security being sought by the finance provider – debentures and guarantees can be onerous relative to the funding sought.

At Hydr, we do not require personal guarantees, charges or debentures. Our proprietary platform and algorithm paired with our class-leading Xero integration means we can tell you in real-time whether we are able to fund your invoice or not. If we can, we don’t ask for anything else, just a fair, fixed and transparent fee for 100% payment of your invoice.

Put simply we are reinventing how invoice finance is done.

6. Is it a disclosed or undisclosed product, and if so, are there genuine experts managing your interests?

A disclosed product means that your customer is made aware you are working with an invoice finance provider. An undisclosed product is the opposite. In times gone by, a stigma has been attached to invoice finance because of how the collections process was managed by some disclosed providers. This sort of behaviour has been unhelpful to the sector and we are working hard to change it.

Hydr is a disclosed product. We want your customers to know that we are working together. We have a team of experts in this space and take pride in building professional, light touch relationships with your customers. You haven’t come to us because you are in distress and we have no interest in giving that impression to your customers. We act as a genuine extension of your finance team and you should view us as such. In fact, informing your customer that payments are being managed by a trusted third party will positively change the dynamic of your relationship with them and, over time, should improve their payment behaviour.

Are you ready?

If you’re ready to discover how invoice financing can work for you – book a demo today.

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