10 things to look out for when choosing a new Invoice Discounting provider

If your company has Invoice Discounting facilities with Ulster Bank, then you are very aware that the bank is exiting the market before the end of the year. You may think that means you have plenty of time to put new facilities in place with an alternative provider, but in reality, the alarming news is that you probably don’t!

Often the legals and paperwork involved in setting up a new Invoice Discounting facility take up a lot more time than you may have allowed for. So now is the right time to start the process of switching and avoid the significant negative impact of not doing so in time.

The first step is to choose a provider who can take over Ulster Bank Invoice Discounting so that you switch smoothly and ensure there are no disruptions to your company cash flow. InvoiceFair is one of the few companies that can offer a seamless transition from Ulster Bank Invoice Discounting and provide a competitive alternative for your funding needs.

What are the 10 things to look out for when switching your Invoice Discounting facility?

So now that you’ve realised you need to start the process of finding an alternative to your current Ulster Bank Invoice Discounting facility as soon as possible, what are the important things you need to check with your new provider? 

1. How much of your Debtor Book will you be able to leverage?

This is probably the most significant differentiator between the providers you will review. At the very top level, the first thing you need to establish is what the topline policy is in terms of your overall Debtor Book. In a lot of cases and certainly for more traditional Invoice Discounting providers, they will have a limit of releasing no more that approx. 75% of the value of your debtor book – and that is before they start adding other restrictions! So before you even start, something like 25% of what you thought you might be eligible for is wiped out.

2. Are there Debtor Concentration limits in place?

The next hurdle to overcome is Debtor Concentration. Many providers don’t like you having individual customers that represent large percentages of your total revenues. Example: Company A is a very successful company with a long trading record and an annual turnover of €3m. They have 10-15 active customers who trade at varying levels of frequency. The largest client represents 30% (€1m) of the debtor book. Providers that operate a debtor concentration policy don’t like that you are so ‘reliant’ on a small number of customers. In this example, it is highly likely that Company A’s largest debtor will be either excluded or restricted when calculating how much funds will be released. On average, they will probably discount what they will fund from large customers like this by around 70%.

3. Will they fund any Debtors you have based in other geographical areas?

Next, they will look at where your debtors are based. Most modern Irish companies are trading with large global and pan-European customers. In many of these cases, they are based outside of Ireland. Again, more traditional ID providers will either totally dismiss or discount these valuable customers and not release any funds against their invoices. 

4. Do they implement Industry / Sector restrictions?

In the eyes of traditional ID funders, not all industries are equal! So, you should check what (not if!) restrictions are in place for your industry? For example, the construction industry you would think is a prime sector for Invoice Discounting. Secured contracts, good margins, phased payments?Wrong.Many will NOT provide facilities to businesses in the construction sector and there are many more industries that they won’t cover either, so you need to check if your industry is one of them!

5. Will you be able to increase your facility at short notice?

Here’s a typical scenario for a growing business. Your business grows faster than anticipated and in order to fulfil orders or take advantage of major opportunities or new contracts, you need to increase the Invoice Discounting facility to reflect your larger debtor book. And quickly. With traditional funders, that will mean a painful process of re-applying for a larger facility. Lots of red tape, time and cost. This is a crucial issue for business on a fast growth trajectory, so make sure whoever you go with gives you the flexibility to increase the facility to match your ambition.

6. Are there any hidden fees or charges?

One big area to check is the presence of a whole host of additional ‘soft’ costs. You know the drill. You get reeled in on a headline cost you think that’s it and then suddenly you see a number of fees & charges driving up the cost of finance. And there are loads of them – Disclosure Fees, Electronic Service Charges (really), Collection Charges, Drawdown Charges, Annual Audit Fee. What about this beauty, the clearing days interest charge. Funds are received on day 1 but they don’t “Clear” through to your account for 3 days, artificially increasing your outstanding balance and therefore the fees you pay. The list is endless, so make sure you clarify what the full list of charges are before you sign up.

7. Are they asking for the Directors to give a personal guarantee?

Let’s be honest, given the likely amount of funds involved, it is fair enough to expect some level of security to be asked for. In most cases, this extends to the Directors giving personal guarantees. If you don’t fancy literally betting the house on your business, find this out at the start of your search!

8. How quickly will the funds be released?

This is a hidden ‘cost’ to watch out for. What is the commitment in terms of releasing funds once a debtor pays? Many providers hold on to your money for an unreasonably long amount of time. You should be looking to have the funds released to you within a day, otherwise it may compromise your bank balance and cashflow. This is a key question to ask any provider you may be reviewing.

9. Are there any other unique features that you can avail of?

Now that you’re kind of ‘forced’ into finding a new provider, this is the ideal time to see if you can avail of any extra features. For example, Innovative Invoice Finance from InvoiceFair allows you to add a further element to your Invoice Discounting facility by adding up to 40% of the value of your WIP (Work in Progress). This means a significant increase in the level of funding that will be made available to you.

10. How quick is the Onboarding?

So you’ve done all your homework and you are ready to flick the switch, now, how quickly can they get you ‘on’? With the amount of paperwork and red tape involved, this can be startlingly long and run into multiple weeks and even months! Best to make sure you are clear before committing.

Why should you consider switching to InvoiceFair? 

InvoiceFair are a specialist funder for businesses – in fact, it is all we do! In the past 5 years, we have advanced over €1bn to Irish & UK Businesses with a range of market leading solutions including Invoice Discounting. We know that you will find our technology platform easy to use and we can help you get set up within minutes of signing up with InvoiceFair.So here’s our sales pitch!

• We will release up to 90% of your entire debtor book – no-one will release more than that.
• Because we DON’T implement debtor concentration limits, we can release more funding to you than you get currently from Ulster Bank.
• We do not have any geographical limits either, so we are happy to fund your foreign customers.
• We take every application on its own merits rather than a blanket Sector or industry restriction.
• We do allow for facility limits and an implement them pretty quickly without having to re-apply.
• Our fees are clear and transparent – just compare them against anyone else you are considering if you want any evidence!
• We will not ask your Directors for Personal Guarantees. Ever.
• Funds are ALWAYS released within 24 hours, the only reason they even take that long will be down to the banking system and not us!
• Our Innovative Invoice Discounting solution includes the ability for you to leverage up to 40% of your WIP. Not many others will give you that additional funding line.
• Everyone you will deal with are real people who are actual business experts and not some random call centre operators.
• Our system is easy to use. No need to learn new systems. Just login, upload your documents and wait for funds.

No matter how smooth the process, switching providers for something as technical as Invoice Discounting will result in disruption to your business unless you act now. The good news is that there is a solution for companies affected by Ulster Bank’s decision. InvoiceFair are here for your company when you need us. We can provide invoice discounting facilities to your business with no hidden costs and no disruption to your cash flow or funding line. Find out how much you could raise in 24 hours with our calculator here.