Traditionally business owners have turned to their Bank Manager when proposed expansion or investment has meant that they require additional funding for their business. The Bank Manager has normally responded by granting an overdraft facility or agreeing a medium term loan.
However, the major high street banks are looking to shore up their severely weakened balance sheets and part of this process has meant a reluctance to lend (particularly to cash-strapped owner-managed businesses) and a significant hiking in their fees and charges in the process.
The benefits of Invoice Discounting compared to an overdraft facility are clear:
1. More generous funding criteria – up to 80% of outstanding debtor balances.
2. Less personal security – whereas overdraft is often secured against personal property Invoice Discounting requires little or no personal security.
3. Equivalent or even lower charges – with bank interest rates rocketing Invoice Discounting now looks very attractive in comparison.
4. Less negotiation – rather than constant and protracted negotiations to increase limits the Invoice Discounting facility grows with the business’s working capital requirements.
These facilities are completely confidential and easy to manage.
One perceived downside of these facilities was the fact that the client was tied in to a long term contract, but for the right clients, Calverton Finance are now offering a rolling monthly facility which can be terminated at any time.