1/ Healthy competition encourages the best rates…
There are around 60 lenders in the UK who can provide invoice factoring and invoice discounting. It’s (very) unlikely that you’ll have the time to speak to all of them and it is almost impossible, without prior knowledge, to decide which lenders would be the most appropriate for you specific requirements, so how do you choose who to speak to?
A good invoice finance broker will spend most of their time talking to you about your requirements and your business to build up a detailed picture of the scenario with which they are presented. Whereas brokers know their own market they will have had little information about your business even if some research has been done prior to the conversation. This exchange of information gives the broker the necessary tools to select the right 2 or 3 lenders from the marketplace to introduce to you.
Once you have made contact with lenders with the correct level of appetite and industry experience; to some extent the battle is half won. In an incredibly competitive marketplace, lenders will compete against each other to provide the best prices in an effort to win your business; this will go a long way in helping you to secure the most cost effective facility.
2/ The Jargon Battle Continues…
On any invoice finance offer letter there can be (amongst others):
The lender’s representative should explain these terms to you and the effect they will have on the cost of the facility and the restrictions they place on the utilisation of the facility. Even so, it is still their job to get you to sign on the dotted line.
You may wish to consider the benefits of an independent broker looking over and comparing the offers you have on the table. They can explain any jargon that isn’t clear and give an unbiased appreciation of the implications of the pricing structure to your specific business.
3/ It’s good to have someone on your side…
Should this be your firm’s first foray into invoice finance it may be useful to have your broker attend any face-to-face meetings you have with lenders. At the very least it is incumbent upon your broker to help ‘signpost’ the next steps in the process; what information may be required, what the meeting will consist of and the kind of terms you should expect to be presented with.
They can also be useful in helping to negotiate your rates. An experienced broker can reasonably accurately price up anything other than the most complex proposition and, as such, can use that knowledge to know when and where a better deal can be extracted from the lender. This may be of particular benefit when you have chosen your preferred lender, as by dangling the carrot of a potential win to that lender they are then often able to make a favourable amendment to rates or fees associated with the proposed facility.