If your business needs some help with recovery or financing a liquidation, it’s never too early to look at the best debt finance options available. From helping our clients with raising money from their debtor ledger to arranging pre-pack liquidations, McAlister & Co help businesses get back on track.
Invoice discounting is a system whereby you borrow money based on invoices you have issued, which have not been settled. In essence, a third party is temporarily paying you what your debtors owe you.
In an arrangement with an invoice discounter, you would bill your customer as normal, but you would also forward a copy of the invoice to your invoice lender. They would then forward you a percentage of the money owed (typically up to 90%) and the billed customer would pay their invoice as usual, under the normal credit terms of 30 days etc. When the customer settles the invoice, they pay the money into a trustee bank account, set up for you by the invoice discounter. The remaining money is then forwarded to you, minus any interest and fees for the service.
Invoice discounting can greatly improve a company’s cash flow situation as it takes away the waiting time for customers to pay. In particular invoice discounting is discreet, as there is no alteration to the way you invoice your clients and the invoice discounting firm have no direct dealing with your debtors.
As with invoice discounting, factoring is one of the best debt finance options if you need to borrow cash, short-term. It allows you to borrow this cash against the value of your debtor ledger. Factoring offers an added service, in that the factoring company will take responsibility for the billing of customers and collection of payments.
Taking advantage of a factoring service will improve your company’s cash flow, free up time spent on invoicing and chasing unpaid invoices and allow you more of a definite budget to work to.
Asset Finance allows you to borrow money to fund the purchase of equipment for your business.
Asset financing usually takes the form of leasing, or hire purchase. In a leasing arrangement, the lending company purchases the asset on behalf of the lender and charges them a regular ‘rental’, including interest over a fixed period. At the end of the fixed period, and on completion of the final payment, ownership of the asset is transferred to the borrower.
Hire-purchasing allows borrowers to spread the costs of large purchases in a similar way. After an initial deposit, regular amounts are paid to the lender for a fixed period. At the end of the contract period, the borrower can usually pay a final sum to purchase full ownership of the asset, extend the lease, or return the asset.