A Guide to Invoice Finance

ContentsA little bit about your dedicated Corporate Manager 3

Invoice Finance explained 4

Sectors using Invoice Finance 5

What is Factoring? 6

An illustrated guide to Factoring 7

What is Invoice Discounting? 8

An illustrated guide to Invoice Discounting 9

A little about Skipton Business Finance 10

The types of businesses we cater for 12

Structuring a deal 14

My local o�ce is: 1 Park Lane, Leeds, West Yorkshire, LS3 1EP

Name: Allan UnderwoodBased: 1 Park Lane LeedsMobile 07739 178430DDI: 0113 388 4311Email: aunderwood@skiptonbf.co.uk

Web: skiptonbusiness�nance.co.uk/au

Your Corporate Manager Allan Underwood joined Skipton Business Finance in November 2008 and looks after the North Yorkshire, Humberside and North East regions. Since then, he has been successful in forging good long term relationships with a diverse range of supporting introducers from Accountants, Solicitors, Insolvency Practitioners, Finance Brokers, Business Advisors and Business Angels.

With 23 years of experience to call upon within the �nance arena and has an exceptional understanding in structuring deals to maximize a client’s funding requirements.

He has helped structure �nance for a number of SME’s and is a key member of the salesforce.

Unlock cash tied up in unpaid invoices

The heartbeat of your client’s business is their cash �ow and recommending them a suitable invoice �nance facility will aid their �nances and help them build a sustainable and successful business.

Simple Invoice Finance

As a business owner, your client will always have to have one eye on whether or not they have a shortfall of funds.

If they do have a shortfall, it is known as a cash �ow gap and invoice �nance is a solution that can ensure a �uid cash �ow within their business. A cash �ow gap can increase and this is largely down to:

> Suppliers tightening credit terms > Customers going bankrupt > Insu�cient bank facilities available > Poor credit control

Invoice �nance takes two main forms: Factoring and Invoice Discounting.

Ideally, money made from trading would come in before, for example, a major bill had to be paid or tax was due.

Did you know?

Invoice �nance is supplied to 42,000 businesses and our industry transact over £212 billion of clients' invoices each year.

Enterprise Finance Guarantee

The Enterprise Finance Guarantee Scheme (EFG) is a facility for small businesses intended primarily to improve the availability of working capital through term loans and the consolidation of overdrafts.

It’s a great way to inject working capital into an existing business and by raising invoice �nance against outstanding invoices, EFG can often compliment invoice �nance facilities . Speak to your Corporate Manager for more.

Manufacturing12,897

Distribution9,684

Services12,675

Transport 2,831Retail 153

Construction 1,344Other 1,927 Number of businesses

using Invoice Finance

What is Factoring?

Factoring is a �exible cash �ow solution, which advances money to a company as it issues new invoices. Factoring is probably the most common form of invoice �nance in the UK.

Flexible Factoring

As factoring involves advancing a �xed proportion of each invoice, the money available to your client will increase automatically in line with their business growth.

Factoring is a facility that is disclosed to your client’s customers as Skipton Business Finance act on behalf of your client when chasing payments. You can be assured that we chase all payments professionally and e�ciently and our credit control is an extremely e�ective service for businesses that do not have established credit management procedures.

We’re also proud to collect payments from customers faster than the industry average!

The main bene�t from factoring is that your clients will get cash against their invoices almost immediately and up to 90% of the value of their outstanding invoices.

Did you know?

There were 18,894 businesses with factoring facilities at the end of 2010, a �gure that grows year on year.

The Bene�ts of FactoringYour client can receive funds within 24 hours of submitting an invoice

Savings can be made on debt collection and sales ledger management, as Skipton Business Finance will do all of this on behalf of your client

Factoring is very well priced against traditional business loans and overdrafts

The facility keeps pace with the growth of your client’s business

Allows your client to know when funds are going into their bank account, rather than the uncertainty of when invoices will be paid

Your client will not have to secure a loan against any other assets meaning more �exibility for their business

At Skipton Business Finance, your client will have a dedicated Relationship Manager throughout the lifetime of their facility. That means no automated telephone services and no call centres. Just the direct contact details of a highly-trained and e�cient Relationship Manager

Step 1

Your client invoices their customer and sends a copy to us

Step 2

We then advance your client up to 90% of the value of the invoice within 24 hours

Step 3

Our collections department will then chase the payment from your client’s customer

Step 4

Your client’s customer will then pay us 100% of the value of the outstanding invoice

Step 5

We will then give your client the remaining value of the invoice less costs. You could also receive commission!

YOUR CLIENT

SBF

CUSTOMERSBF YOUR CLIENT

SBF CUSTOMER CUSTOMER

SBF YOUR CLIENT SBFYOU!

SBF

What is Invoice Discounting?

Invoice Discounting is exactly the same as factoring and advances money to a company as it issues new invoices. However the company continues to invoice and collect the invoices in the normal way and the service is con�dential so they will notice no changes.

Invoice Discounting

Invoice Discounting can be disclosed or con�dential, also known as Disclosed Invoice Discounting (DID) or Con�dential Invoice Discounting (CID).

With DID, your client is made aware of our involvement, usually through a 'notice of assignment' which is printed on copies of all invoices and all payments are made addressed to Skipton Business Finance.

With CID, customers have no awareness of our involvement and your client will continue to invoice and collect payments into a trust account.

Invoice Discounting is a popular alternative to factoring, which should be considered by companies that already have an experienced credit management team.

Did you know?

There were a total of 17,466 invoice discounting clients in the UK in 2010 representing £180 billion of sales.

The Bene�ts of IDInvoice Discounting has ALL the bene�ts you’d expect from factoring but if your client already has a well established credit management team, then they can still utilise this strength whilst bene�ting from the extra cash released

Invoice Discounting can be disclosed or con�dential, also known as Disclosed Invoice Discounting (DID) or Con�dential Invoice Discounting (CID)

Step 1

Your client invoices their customer and sends a copy to us

Step 2

We then advance your client up to 90% of the value of the invoice within 24 hours

Step 3

Your client will retain full control of the credit management.

Step 4

Your client’s customer will then pay us 100% of the value of the outstanding invoice

Step 5

We will then give your client the remaining value of the invoice less costs. You receive commission!

YOUR CLIENT

SBF

CUSTOMERSBF YOUR CLIENT

CUSTOMER CUSTOMER

SBF YOUR CLIENT SBFYOU!

SBFYOUR CLIENT

and 23% came from the distribution industry!

Who are Skipton Business Finance?Independent of the main banks, we are a wholly owned subsidiary of Skipton Building Society, an undoubted mutual �nancial institution established in 1853. With no expensive shareholder dividends to pay, the ethos of our business is very much focused on understanding our client's businesses and assisting in creating wealth and jobs in the regions, rather than purely pro�t.

A Flexible Approach

We never use a system-style scorecard and make each decision based on the individual merits of each and every business.

And the bene�ts don't stop there. When one of your clients becomes a customer of Skipton Business Finance you'll be pleased to know that we boast a low client-to-sta� ratio meaning that not only will they always get direct access to the decision makers, but our specialised Relationship Managers can o�er them all the time and focus they need.

This means that the funding facilities we can provide to your clients are set up and managed in a refreshingly di�erent way to our competitors.

Our experienced team adopt a commercial approach to underwriting, putting people and business at the forefront of our decision-making process.

Did you know?

Manufacturing companies only represented 23% of all new invoice �nance clients in 2011. There are many other sectors to go for!

Clients often highlight the impressive ‘people-orientation’ of the business and

laude the quality of the sta� that they deal with on a day-to-day basis.

We work with UK businesses...

Those who sell goods and services to other business and those on standard credit terms not exceeding 120 days.

Who do we cater for?

In 2011 alone, Skipton Business Finance will have served the SME sector for 10 years, providing them with a range of invoice �nance solutions and unlocking cash that would have otherwise been tied up in unpaid invoices.

Our commercial stance means that our experienced team use a common-sense approach and never use a system-style methodology to our underwriting.

This gives greater �exibility in our approach to lending and means we are able to provide funding in many cases where the business may have already been turned down by their bank who have failed to see the future potential in the proposition.

Our funding lines start from as little as £25,000 and currently go up to £5,000,000 and our existing clients range from new-starts to established businesses with annual sales of up to £30,000,000.

Did you know?

In 2010, there were over 12,000 UK businesses in the services sector alone that used invoice �nance facilities

Our �exible criteria bene�tsSole Traders, Partnerships, Limited Companies and PLC’s

Transactions including acquisitions

Management Buy-Outs and Management Buy-Ins

New-starts and long established companies

Pro�table and non-pro�table businesses

Phoenix businesses

Re�nancing and Restructures

Metal Fencing Manufacturer• £900k Con�dential Invoice Discounting • £60k P&M

• £60k EFG Facilities • MBO of family business

A time critical deal completed in just 10 days from �rst visit.

Precision Engineering Company• £900k Factoring Facility • Re�nance

This facility was to replace a very restrictive bank overdraft, where the bank

were demanding increased personal security just to renew.

Clothing Manufacturer• £100k Factoring Facility • Single Debtor Finance

With only one customer, this was deemed by many lenders as far too risky

to lend to. Skipton Business Finance was only too happy to help.

Temporary Recruitment Agency• £500k Disclosed Invoice Discounting • New Start

Supporting a quality management team following their split from previous

unappreciative employer.

Tool Making Company• £160k Con�dential Factoring • Transaction - BIMBO

To fund the management buy-out of this long established manufacturing

business with additional new management.

What sets us apart from our competition?

Your client is at the centre of everything we do and you can be con�dent that our hands-on and �exible client-management ensures a smooth and professional switch to our facilities.

Signing up an IF Deal

We honestly believe that we’re a pioneer in understanding the future potential of your clients and have enjoyed great success in working with UK businesses that, when given access to additional working capital, go on to �ourish and reach their full potential.

That’s why we’ve continued to grow and develop our client-orientated business model whilst o�ering excellent commission structures for our partners and introducers.

And it all starts when we receive our �rst enquiry from you...

From the initial enquiry all the way to funding your client, Skipton Business Finance prides itself in making the experience extremely professional for both you and your client.

Did you know?

Skipton Business Finance won the prestigious “Most Supportive Asset-Based Lender of the Year” award at the 2010 St. Nick Turnaround Awards.

Step 1

Firstly, we require basic information of your client just to gain and understanding of how it operates and what type of facility they require.

We can then determine whether a business will bene�t from an invoice �nance service.

Step 2

Next, one of our highly expereinced and e�cient Corporate Managers who will try and build as big a picture as possible of how the business operates looking at various elements (see right).

YOUR CLIENT SBF YOUR CLIENT

Step 3

If we feel we can provide the business with invoice �nance, we will issue an o�er which will outline:

- The type of facility o�ered (factoring etc)- How much money we can make available- Cost of facility- Any further documentation that we may require- Personal Guarantee

Step 4

Once an o�er is accepted we then work to process the application, leading to legal documents being raised.

Once all the relevant documentation is completed and signed, the facility can be set up.

YOUR CLIENTSBF

SBF YOUR CLIENT

SBF

The Picture We BuildFinancial situationIt is essential for SBF to build up a complete history of the �nances at your client’s business. Actual and forecasted turnover, pro�t and loss and net worth will all be assessed.

How the business tradesWe look at bureaucratic procedures, such as order con�rmations, PODs and communication of payment terms amongst other information.

CustomersWe need to know who your client’s customers are so we can determine how credit worthy they are.

Management Sta�We like to know who the key people are in your client’s business, including details of their previous work history and experiences and details of other businesses they have owned or been directors of. Even if they have been involved in a failed business, we are still able to help.

AssessmentThe type of paperwork we usually like to see is proof of ID (a passport or driving licence), a data protection from, a sales ledger and a copy of their invoices.