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Thinking of exiting from your invoice finance arrangement? Read on

It may suit some firms to use factoring or invoice discounting endlessly as it suits their business model. It enables them a constant, controllable supply of cash which eradicates the need to spend time on credit control.

However, others who use invoice finance will eventually stop because they’ve built up their working capital to a point where they no longer need external funding.

Plan ahead if you want to stop using invoice finance

Most finance arrangements have an agreed term so if you’re considering stopping you should check to see how much notice you need to give. If you want to stop using the facilities early there could be a penalty fee.

When coming to the end of you invoice finance agreement your business should be cutting back on how much you rely on it for working capital. If there’s a minimum charge for using the facility it may mean you need to continue drawing down funds equal to this. Although, if there isn’t you should consider how to reduce its use to almost nothing.

It is essential you plan your cash flow thoroughly. You have to be confident that the capital which is used to come from factoring Is now available from other sources. As the agreement comes to an end, your funder will give you a settlement figure and if you’ve managed your finances correctly you’ll be in a position to pay this off.

Implications of terminating your invoice finance arrangement

If you’re are considering to stop using invoice finance, it’s important to recognise how you’ll replace the other services that it may be giving you.

Invoice factoring arrangements also outsource credit control. When the arrangement terminated you’ll be responsible for collecting your own debts and this could require more effort than you were expecting. In today’s economy it’s not wise to expect customers to pay up on the due date. Many businesses employ credit control specialists who understand how to manage the process of getting cash in from customers.

Another advantage of invoice finance is often credit insurance, which protects you against the risk of a customer being unable to pay their bills. If you have benefited from this insurance, you need to assess the financial risk of now longer having that in place. 

Alliance Commercial Finance are happy to talk through any enquiries, contact us today on 01789 761 274! Alternatively fill on our quick quote form for a call back.

Added: 13 Oct 2016 10:53

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