“All businesses, especially ones that have recently started up, struggle with cash flow, following product innovation spend.” We spoke to Paul Johnstone, Invoice Finance Partner at Clydesdale and Yorkshire Bank to gain his expert opinion on starting up a new business.
"It’s a bit like having an overdraft with a flexible, variable limit and these days, nobody minds admitting to an overdraft. Most of the companies we work with opt for confidential invoice discounting where we make funds available to cover outstanding invoices. Because the contact is only between the company and us, the company’s customers need never know that it is using our services to enable it to pay its invoices. The company continues to trade and the money freed up helps that company to further its growth in the market.
The process of confidential invoice discounting is straightforward. The business notifies the bank of the value of the invoice they have. If the bank is happy with the nature of the invoice they will make funds available to them up to 85% of the value of that invoice. The percentage level varies and each case assessed separately, but generally the quality of the company’s sales ledger will drive the size of the amount covered.
Invoice finance is not suitable for all types of company. The product is ideal for companies which ‘sell and forget’., any company that makes a sale and then moves on to the next one. Invoice finance is less useful when there potential for disagreement over the invoice, such as stage payments, or if there’s any likelihood of a dispute that would stop a company paying up.
Clydesdale/Yorkshire Bank’s service differ to the normal offering as we are structured with invoice finance as part of the whole Bank. Other banks or finance companies may have separate invoice finance functions with large overheads and lengthy approval procedures. With us everything is in the one place so we can respond quickly and get authorisation fast. Also, because we are one organisation, we don’t charge for moving funds around – our internal transfer system is instantaneous."
For more information see www.ybonline.co.uk