Whether you are an existing user of Invoice Discounting, or a business considering this form of finance for the first time, it is very difficult to compare one deal from a lender to another from one of the many others. This often leads to existing users sticking with a deal which might not be that competitive or to a new user feeling paralysed in their decision making.
The reasons why the comparison is difficult is that:
- The structure of deals are often different, involving different percentages of advance against invoices or recourse periods.
- Interest rates will vary, not just in the margin applied but also in the base cost of funds used.
- Minimum fees often apply which will ‘trip in’ at different levels.
- In addition to the interest, a finance fee will apply, usually as a percentage of discounted invoices which needs then to be added to the interest charge.
- Different lenders might apply different concentration limits or notice periods for withdrawal
- There can be additional charges (e.g. for having funds transmission accelerated) which can all add up.
We have several growth businesses considering this form of funding at the moment and have devised a ‘deal calculator’ which helps make these comparisons. It is an important decision that is being made here and we understand that such professional support can be useful.