Selective Invoice Finance
Compare invoice finance online and have the leading lenders compete for your business. Get the best deal with ABC Finance.
Rated Excellent on Reviews.co.uk
What is selective invoice finance?
Selective invoice finance, also known as spot factoring, is a form of invoice finance that enables you to fund either a single, or only selected invoices.
Most invoice finance facilities are used to fund a company’s entire accounts receivables, but a selective facility is a more flexible alternative.
While many funders are happy to operate on a single invoice, once your account is approved, it’s easy to go back to them with further invoices as needed.
How does it work?
Selective invoice finance works as follows:
- Your funder takes over credit control – Payment will be chased to ensure that it’s paid on time and in full.
- You receive the balance – Once the invoice is paid, you receive the balance, minus your agreed charge for finance.
- You sell your invoice to your factor – You receive an agreed amount, up to 90% of the invoice value within 24 hours, often faster.
What are the key use cases for selective factoring?
The biggest use case for selective factoring is for businesses in need of a short-term cash flow boost.
While a longer-term invoice factoring or invoice discounting facility is ideal for longer-term cashflow needs, selective financing is ideal for short-term needs.
What industries could benefit from selective invoice financing?
Businesses in almost any industry could benefit from selective invoice financing, as long as they operate B2B and on delayed payment terms of 30 days or longer.
Industries that often take this sort of facility include:
- Manufacturing – see invoice finance for manufacturers
- Construction – see construction invoice finance
- Recruitment – see recruitment invoice finance
- Printing – see invoice finance for printers
- Wholesale – see invoice finance for wholesalers
- Haulage and Transport – see invoice finance for transport & haulage
- Security Services
What are the benefits and drawbacks of selective invoice finance?
Benefits
- Fast – Funds are usually available very quickly, and can usually be drawn within 24 hours of your application.
- Flexibility – You choose which invoices to fund. If you don’t need to fund a particular one, then you pay nothing.
- Short-term – You are not tied into a long contract and can use the service only as required.
- Simplicity – The charges are easy to understand. A ‘cost of credit’ is agreed upfront, and only a single fee is charged.
- Easy application approval – Funding may be easier to come by than with an unsecured business loan, due to the added security for the lender.
Drawbacks
- Cost – The cost is usually higher than traditional invoice finance facilities for each pound borrowed. Although this is usually offset by the selective nature of the facility.
What are the alternatives?
The alternatives to selective invoice finance are:
- Revolving credit – Usually either a business overdraft or business revolving credit facility, this is an unsecured facility that can be used to borrow and repay funds as needed.
- Business loans – Business loans and, in particular, unsecured business loans are a longer-term solution that allow you to borrow a lump sum and repay it over a fixed term.
- Business credit card – A credit card can be used to cover short-term cash flow requirements, although the interest costs can be high.
Of course, longer term invoice finance facilities such as debt factoring or confidential invoice discounting could also be considered viable alternatives.
Will I be eligible?
If you have invoices to other businesses on delayed payment terms of 30 days or more, there is a great chance that you’ll be eligible.
Spot factoring is underwritten on the financial strength of your customer, so as long as they have a reasonable company credit score and acknowledge that the invoice is due, you should be approved.
To find out for sure, the easiest way to is to get in touch with the experienced team at ABC Finance today, and we’ll be able to compare offers and secure the funding you need quickly.
Related – Invoice finance guides.
Who can apply?
We can fund the following:
- Sole traders
- Partnerships
- LLPs
- Limited companies
- PLCs
How is my application assessed?
A large part of the assessment process hangs on the strength of the invoice that you’re looking to fund, and the nature of the works undertaken.
Where the company who are to pay the invoice are highly creditworthy, your chances of success are high. This is because the lender is reliant on that business for repayment, not on your business.
This means that if you’ve suffered adverse credit or your historic accounts do not show strong financial performance, you may still be eligible for borrowing.
What are the risks of selective invoice discounting?
This method of funding is more expensive than full factoring or invoice discounting facilities on an invoice by invoice basis.
The main risk is that you become reliant on regularly funding the majority of your invoices to cover cash flow.
Should this happen, it may prove to be an inefficient product, and consideration should be given to the idea of taking out a more permanent facility.
