Is Your Invoice Finance Provider Harming Your Business? Is Your Invoice Finance Provider Harming Your Business? Skip to content

Is your invoice finance provider harming your business?

Invoice finance is a fantastic way to help your business succeed.

However, with all the jargon, terms and conditions and overwhelming sales pitches thrown at you, it can be hard to know whether an invoice finance provider is the best fit – and you might end up with one who is doing more harm than good.

Here are some points to look out for to help you decide if your invoice finance provider is harming your business.


You’re not getting all of your cash flow
When you take into account the percentage of your profit your invoice finance provider keeps for themselves, using them might not actually be a cost effective way if using invoice finance.

It seems common amongst a lot of the big invoice finance providers to only give you 60-90% of your invoice value in advance.

Not only does this make your agency lose money, it can have serious consequences on your business, and it can impact your relationship with a contractor if they are paid late as a result.


Your invoice finance provider charges interest on late invoices
Late invoices happen – it’s a reality in the industry. However, if it’s not the fault of your business, why should you be penalised for it?

If your invoice finance provider is charging you interest for late invoices, you’re losing money instead of investing it into your business.

You’re also unable to place more contractors and get ahead of your competition. And, on top of this, your profit margin and available funds will be reduced.


All turnover agreement
If your invoice finance provider insists on having an all turnover agreement in place, they are instantly forcing restrictions on your business.

You have no flexibility to decide which of your clients to fund through your provider, so you don’t have full control over your business. And, if one of your clients fails to pay, the funds you have to work with other clients may be reduced.


Personal guarantee and debentures
Personal guarantees and debentures are two more barriers placed in front of you, before you can even access any funding.

These are especially common with banks and traditional invoice finance providers. Personal guarantees and debentures are very outdated clauses in invoice finance so, if your financier insists on having these in place, it’s a sure sign that it’s time to look elsewhere.


Concentration restrictions
Something that we, at Sonovate, find really puzzling is why an invoice finance provider would want to restrict the amount of business you do with your clients.

It means you can’t grow at the speed that is organic to your business. It might cause you to lose a big client, if you aren’t allowed to place the number of contractors they need. And, if you want to review your finance, you’ll be expected to pay additional fees.


Reserves are just another pain – they hold back your business, retain your profit and stop you from moving forward.

What’s more, reserves impact your cash flow and forecasting, as the amount reserved is often not made obvious at the start.


Renewal fees
You would think that, when your contract is coming to an end, your invoice finance provider would do anything to prevent you from moving to one of their competitors.

But sadly, with a lot of providers, this isn’t the case at all. Instead, they charge renewal fees – so you have to pay to continue giving them your money!

It makes no sense.


Other hidden fees
We’re not done with fees quite yet.

As well as all of the fees and extra charges we’ve already mentioned, your invoice factoring provider might also expect you to pay:

  • Service fee
  • Bad debt protection
  • Interest
  • Audit charge
  • Refactoring cost

In fact, there are more than 21 hidden fees your invoice finance provider might expect you to pay to receive funding from them.


Not industry experts
It is more than likely that your invoice finance provider is not an industry expert.

They don’t understand the intricacies of recruitment or consulting, they’ve just adapted their standard model to sort of accommodate your business.

And, because they don’t understand how you work or what your needs are, they aren’t going to provide you with the flexibility you need to succeed.

So, if you’re reviewing your invoice finance provider, why not have a look at how Sonovate compares.

We’re different from most invoice finance providers – we don’t have any extra charges, restrictions or additional fees in place, and we’re dedicated to helping your business grow.

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