Invoice Finance Company Criteria – Checklist

Invoice financing is a great way to improve your businesses cashflow. By using an invoice finance facility, you can relieve the pressure that stems from late-paying customers or those with longer payment terms.

But with a wide range of invoice financing companies to choose from, how do you know which is best for your business? 

This is invoice financing explained, complete with your invoice finance company checklist to help you make the best decision.

Understanding invoice financing

Invoice financing, or invoice funding, is a form of lending that’s based on a businesses invoices. Businesses essentially sell their invoices to an invoice financing company, who pays them straight away. When the customer pays the invoice, the business refunds the invoice financing company, plus fees.

It’s an effective way to solve the problems that come from poor cashflow, which is a direct result of having customers that don’t pay their invoices on time.

Businesses can pay bills, purchase stock or reinvest back into the business to enable further growth. Not being able to do any of these things can cripple businesses; in fact, a reported 82% of small businesses go under because of poor cashflow. 

Is invoice finance suitable for your business?

The nature of invoice funding means it’s better suited to some businesses over others. Consider the following aspects when thinking if invoice financing is for you:

• Business size. Small to medium sized businesses are more able to unlock the benefits of invoice financing. SME business owners often don’t have a lot of time to spend fitting out loan applications, and often need amounts that are less than minimum banks will loan. They may not even be able to get a loan in the first place.

Invoice financing is a great small business financing option. It’s quick to sign up and be approved, is only for the value of your invoices, and the lending is repaid as soon as your customer pays their invoice.

• New businesses. If your business hasn’t been trading long, it can be hard to convince a bank to lend you money. You may not have the capital needed for a deposit, as well as the credit history required.

With invoice financing, lending is much easier to get.

• Long invoice payment terms. Invoices are commonly payable within 30 days, but in some sectors it can be as much as 90 days. This can create cashflow issues covering overheads and anything else that’s due in that time.

For these types of businesses – and even those with cashflow issues in smaller spaces of time – invoice financing helps to bridge the gap between now and when you get paid. 

Preparing your business for invoice finance

While invoice funding is much easier to get than traditional lending, invoice financing companies do need to be satisfied your business is credible before extending you credit. 

You don’t need to do these sorts of things every time you apply for invoice finance – in fact, that’s the easy part. But when you set up an account, there are a few things to focus on in order to unlock the benefits of invoice funding for businesses.

• Get your accounts in order. Invoice finance facilities do make it easier to get credit than banks, but that doesn’t mean they have zero requirements. You’ll need to have up to date financial reports ready to provide.

• Make sure your credit report is up to scratch. What’s your credit rating like? Like any form of lending, invoice funding companies will want to be assured you’ll pay back any money they provide. If you’re a small business owner, it may also mean being able to provide a satisfactory personal credit check too.

• Have a plan for how you’ll use the finance. What are you hoping to do with invoice funding? You might use invoice funding regularly for different reasons each time, and that’s OK. But it helps to have a handle on what those things are before you set up an account.

That also means knowing how getting invoice financing will impact your business. If you’re investing the money to grow the business, what will that growth look like?  

Criteria to select the best invoice financing company

So how can you choose the best invoice financing company? Some are quite different to others, with different features and aspects that impact businesses in different ways. 

Here are some things to consider:

Paperwork needed/ability to get started quickly

Invoice financing for small businesses is about convenience. The ability to sign up and get funding quickly is hugely important for small business owners who already have plenty of demands on their time.

Creating an invoice funding account also involves linking to your online accounting software. Does the invoice financing company link well to your accounting provider? Some integrate really well, while others only come with limited functionality that means simple tasks take longer than they should.

Speed of payments

Again, business owners want to be able to get things done quickly. So how long will it take to see invoice funding in your account? The invoice financing companies with the quickest payment time will likely talk about this on their website. 

Look for a specific number too – do they say a certain number of hours or days? If they do, that means they’re willing to be held to that standard, which gives you speed AND certainty. 

Is it available on demand?

Flexibility sets many invoicing finance companies apart. The vast majority require business owners to use them for all of their invoices. This may not be an issue for you, though it will cost your businesses a portion of every invoice you send out.

However, with FundTap, you can select only the invoices you want paid, only when you need it. This gives you much more control over your finances. 

It’s easy to submit too – it’s integrated into your accounting software, so just select the invoices you want paid. You can get the money into your account in a matter of hours.

Customer reviews

As with anything else online, customer reviews are telling. Look into what their customers are saying – what they like, what they don’t like. 

Don’t just look at how many stars they give it either – why do they like it? Do the reviews talk about aspects of invoice funding that are relevant or important to you? 

Confidentiality 

Many businesses don’t like to tell the world about their finances, and getting invoice funding is the same. This confidentiality is impacted by invoice financing companies requiring your customers to pay invoices to them instead of you. 

They essentially take over your invoice, which means you need to ask customers to change the bank account they pay into. If you decide to stop using invoice funding, you have to ask them to change the account again. 

Not only is that a hassle, but it broadcasts the fact you’re using invoice funding to everyone you invoice. This may not be an issue for you, but it is for others. 

Process of getting invoices paid

So how does FundTap work? It’s designed specifically as a small business lending service, and this comes through in the process.

Create an account

Creating a business invoice finance account with FundTap is quick and easy. It takes less than five minutes to do; there’s no paperwork involved and it’s completely free.

There are no establishment, admin or system fees, which many other providers do have. Applications to set up an account are approved within an hour, not the two weeks or more that traditional factoring providers take.

Link your accounting system

FundTap integrates well with the likes of Xero and MYOB.

Once you’ve created an account, you’ll be directed to sync your invoices. Follow the prompts and authorise FundTap to link to your accounting system by entering your name and password. 

Once you’ve done, you’re all set up. It’s that simple.

Choosing your outstanding invoices that need to be paid

As we’ve mentioned, FundTap isn’t like other invoice finance providers that require businesses to use it for all their invoices. With FundTap, users select only the invoices they want paid. There’s no penalty if you don’t use it. 

To select an invoice to be paid, just go into your accounting system, tick the box, and click submit.

Getting paid!

FundTap provides quick funding within hours of you applying for it. This means a business can set up an account from scratch and get money in their account the very same day. It’s one of the fastest, most convenient forms of invoice funding available.

FundTap pays the full value of the invoice directly into your account. When your customer pays the invoice, the value of the lending is direct debited from your account back to FundTap, plus a small fee. There’s no need to worry about repaying it – it’s fully automated for your convenience. 

Take home message

Like anything, it’s worth looking at your options when you’re considering taking up invoice financing. It’s a hugely effective tool for improving your business’ cashflow, but some invoice financing companies make it easier than others. 

The whole point of invoice funding is to make things easier for businesses, which is what FundTap is built specifically to do. From the very first sign up to the moment you get money into your account, it’s made to be simple.

FundTap is also one of the cheapest invoice factoring services there is. There are reduced fees for early repayment, and fees that start from as low as 4% of the invoice value. This is in stark contrast to other services that charge as much as 20% of invoices.

Find out more with a free demo, or get started with a free account today.