Choosing the right finance provider for SMEs

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    Adopting invoice finance to your business can be extremely beneficial as it increases cash flow. However, it can be difficult choosing the right finance provider for your business depending on a number of factors. Barclays Bank offer a wide range of services that are suitable for most SMEs. Most factoring companies are far too expensive for smaller enterprises and favour companies with higher profit margins.

    Barclays has a wide range of products aimed at maximizing cash flow for businesses while protecting its directors simultaneously. These products include, but are not limited to, sales finance, asset finance, invoice discounting and cash flow finance. These products have been set by over 250 specialists across the UK and Ireland. SMEs with lower profit margins will be able to maximize their cash flow which could help the expansion of their business. Smaller enterprises often struggle with cash flow because of unpaid invoices as they do not have the same funds as larger corporations to make up outstanding amounts.

    Cash flow issues may lead to insolvency which could threaten the survival of any business in question. Under UK legislation a company is considered to be insolvent if it cannot cover its financial obligations. Companies that may be experiencing cash flow issues are not necessarily insolvent as it could be solvent on a balance sheet basis. Businesses that are experiencing cash flow issues and incurring debt would likely seek the help of an insolvency practitioner. The practitioner would suggest looking into areas like financial performance and re-financing. Managing cash flow should be a top priority for businesses. There are many variables that could affect the cash flow of the business. SMEs should invest their time and money in managing their cash flow.

    The use of factors can be extremely costly for small businesses, which is why Barclay Banks has introduced Ping it software that helps businesses save on administration cost and speed up invoice payment. This is extremely beneficial for small and medium enterprises. According to NI Business Info, credit management and administration fees typically range from 0.75% turnover to 2.5% turnover. Administration fees for invoice discounting are typically lower than most factoring companies because you have the option of collecting and managing the debt yourself. For invoice discounting the fees range from 0.2% to 0.5% turnover. Pingit software cuts down these administration costs.

    Barclays also has a unit designated for invoice finance, which is called the Barclays Trade and Working Finance division. This provides Small and Medium Enterprises the security of a big bank by employing the use of SME specialists across the UK and Ireland. Invoice discounting also promotes expansion for smaller businesses. By unlocking funds tied up in unpaid invoices businesses can grow to their full potential. It also makes things much easier for businesses to expand on an international scale. Barclays Trade and Working Capital makes international expansion for SMEs simpler by providing businesses all the expertise they need. The Pingit software helps SMEs create, manage and send invoice trading in international currencies. It is also free once you have obtained a Barclays Business Account. The software allows you to send and receive payment for invoice communication and will also allow businesses to create and manage invoices flexibly. Businesses can also add VAT to their invoices if so chosen. Additionally, the software introduces administrative efficiency by providing invoice reminders and improving customer communications.

    Barclay Trade and Working Capital are a part of the Asset Based Finance Association. This means that the finance provider has agreed to ABFA standards and they must cooperate with competitors when a client wants to switch. Normally, businesses may enter a minimum contract term. If businesses terminate their contract prematurely, they could suffer penalties, however, it is possible to give sufficient notice. The notice period will be provided from the onset of any agreement.

    Barclays Trade and Working Capital recognizes that no business is the same and that there is no one-size-fits-all approach. Barclays Trade products are tailored to use the needs of any business no matter the size. As your company expands, so does the finance, and your company is not limited by cash flow issues. Barclays provides the business client the option of disclosed invoice discounting or confidential invoice discounting.

    Disclosed invoice discounting means your customers will have to pay the finance company directly, but with confidential invoice discounting, customers will pay into an account set up in your name. There are a few risks associated with disclosed invoice discounting, for example, it could affect the relationship you have with your customers. As mentioned previously, with disclosed invoice discounting, your customers have to pay the finance company directly. Customers might change their opinion of the business if they find out that the business is using a finance provider. Some may not even want to be associated with the business if they are using a finance provider.

    Barclays also offers businesses an advance of 90% of the value of their invoices within hours of the agreement. Pingit software makes it easier for businesses to obtain payments at a faster, more accurate rate. The business will also have online visibility of their sales ledger and 24-hour support with a promise to provide quick responses. Barclays also provides export expertise and with their outstanding international reputation, businesses can trade internationally with ease. Their efficiency makes trade finance far simpler for small enterprises.

    Trade finance provides exporters with payment as per the agreement and provides the importer an extended credit to fulfil the trade order. The purpose of trade finance is to introduce a third party to ensure there is less payment and supply risk. The parties involved include banks, trade finance companies, importers and exporters as well as insurers. There are a few risks associated with trade finance such as currency fluctuation and political instability, but Barclays export expertise will help small and medium enterprises navigate these hurdles, as the enterprise’s cash flow issues will be resolved, as well as the risks that arise with international trade.

    Most businesses would consider using their current bank for invoice financing. This could be disastrous if your current bank underwriter decides to change direction and the business could lose its overdraft. Investopedia describes overdraft as an extension is an extension of credit from a financial institution when an account reaches zero. The overdraft allows the business to continue withdrawing from the account even if there are no funds available. SMEs should consider utilizing a finance provider that specializes in their business sector.