Invoices - a Factor for Careful Consideration; Martyn Freshwater, Regional Director of Lloyds TSB Commercial Finance, Reports on the Flexibility of Invoice Finance

Article excerpt

Over the past decade, invoice finance, which includes factoring and invoice discounting, has become a mainstream form of funding for firms of all sizes across all sectors.

The flexible nature of these cash flow solutions means they can be adjusted to match a business' performance and the amount that can be borrowed grows directly with sales. This means that the more trading success a firm enjoys, the more funding can be released and reinvested for growth.

It is suitable for a variety of scenarios which require strong cash flow such as expansion and refinancing, to more complex requirements such as M&A activity and turnarounds. It's this flexibility and adaptability which has seen invoice finance become a key player and significant form of lending in the business funding landscape.

Going the extra mile To further underline its commitment to supporting businesses, Lloyds TSB Commercial Finance recently launched a pioneering Introducer Charter for lawyers, accountants and brokers.

Ensuring that its contacts in the professional community can offer the best possible service to their customers, the Introducer Charter pledges to provide a refund towards cash flow forecast costs, and keep its business introducers fully updated on the status of negotiations at all times.

Lloyds TSB Commercial Finance also enhanced its Client Charter which now enables prospective clients with a turnover of up to pounds 15 million to obtain an indicative lending decision within 48 hours, and offers the option to conclude a facility at any time, by giving 28 days notice without incurring any termination fees.

In addition to invoice finance, the funder provides asset based lending, hire purchase and leasing and can now facilitate access to additional loans for its clients and prospects of between pounds 10,000 and pounds 1 million under the Enterprise Finance Guarantee scheme. Eligible SMEs must have an annual turnover of between pounds 250,000 and pounds 25 million.

These commitments have contributed to almost 90 per cent of Lloyds TSB Commercial Finance's clients consistently saying they would recommend the funder to others over the past three years.

Boosting cash flow Since it can quickly leverage the value of a firm's assets to provide a vital cash flow boost, invoice finance is a crucial form of financing for turnarounds. It helps companies to put themselves on an even keel and release valuable capital when other routes to funding may have been closed off.

Recently, a branded corporate gift supplier which was badly affected by the downturn was able to return to profit and is now set to double turnover over the next eight months, after securing a factoring facility from Lloyds TSB Commercial Finance.

Redrok supplies a wide range of promotional merchandise, including branded pens, bags, T-shirts, calendars and business cards to a variety of clients including Holiday Inn, the NHS, Pioneer and the England Athletics team.

The economic downturn began affecting the business in March 2009. When we spoke to managing director David Williams, he explained: "It was awful, the first thing to be chopped from budgets was corporate gifts and in a few weeks our turnover had fallen by 80 per cent".

Lloyds TSB Commercial Finance provided a pounds 60,000 factoring facility, which leverages the value of a firm's sales ledger to free up cash flow. This is providing Redrok with the capital required to target new business opportunities and invest in new equipment.

Now the company, which currently employs eight people, is winning new contracts on a weekly basis and is on track to double turnover, taking it to seven figures by April 2011. …