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Steven Renwick

06 Sep 2016

Why Invoice Finance is better than an Overdraft

With research telling us that 60% of the country’s SMEs experience late payments (1), the need for businesses to be supported better is evident; not only in ways to reduce the man-hours this absorbs, but also financially, to make up the consequent shortfall in working capital and maintain cash flow.

Let's look at the difference between the traditional Overdraft and other Invoice Finance options as support for small businesses.

THE OVERDRAFT

Many SME’s seeking financial support from their bank in the form of an overdraft, will nowadays find it more difficult due to the significant regulatory shake-up in the banking industry since the financial crisis.

More stringent capital adequacy requirements have forced banks to not only clean up their balance sheets – ending many credit lines or overdrafts with SMEs – but to become far more selective when it comes to lending. Even if issued, an overdraft will undergo regular reviews, and therefore holds the risk that it may be decreased or even withdrawn with little or no notice.

In short, the overdraft is diminishing in availability for our SMEs, even if they have strong cash flows. Even if businesses can get an overdraft, it can’t be relied upon as a long-term means of addressing working capital problems, so they need to find something else to help their businesses move forward

INVOICE FINANCE

The term Invoice Finance suffers from negative connotations, seen by some as a last resort. Today’s suppliers, however, are offering far more affordable, flexible funding that allows businesses to improve their working capital and leverage business opportunities to the full without mortgaging their soul.

These providers offer:

  • payment upfront for your outstanding invoices
  • flexibility to invoice one or several of your invoices, not having to hand over your whole debtor book
  • ability to free up cash to pay suppliers or meet payroll demands
  • affordable costs
  • the security of bad debt protection if a customer defaults on payment or becomes insolvent
  • plus other value-added services from some, such as Satago, to help businesses improve their overall financial health

We believe the future is with these alternative providers. At Satago, we focus on providing innovative methods of managing your cash flow, not only with a unique finance solution, but with a powerful CRM software you can easily add on to your existing accountancy software to bring best practice in credit control and ultimately help you to get paid faster. 

ABOUT SATAGO

  • Satago have a different approach to invoice finance – funding invoices from when they are raised, up until when they are due (and sometimes for even longer, up until 60 days overdue). This ensures as much value of an invoice as possible stays in the pockets of SMEs, making their cash-flow more reliable, reducing the need for reliance on funding and keeping costs to a minimum.
  • In real terms, Satago will advance up to 85% of the invoice value – for a single invoice or several - immediately transferring the amount to your bank account. The fee is usually 2-4% of the invoice value financed per 30 days. The fee is dependent on a number of factors such as your credit risk and that of your customer when we buy the invoice.
  • The Satago all-in-one cash flow solution is an add-on to your existing accountancy software, and means you can be equipped with effective finance solutions to cover the funding gap – PLUS a proficient credit control strategy including a cutting-edge debtor tracking system and integrated credit risk data, to help avoid the issue of late payments overall, cutting down the time chasing payments