Monday 29th Oct 2018
A northern based freight forwarding company has experienced a strong period of sustained growth within the past 2 years; however this has put additional strain on their cashflow. In order to counteract this they sought the help of Hitachi Capital Invoice Finance, who were able to put an invoice discounting facility in place with a funding limit of £1 million.
Why did the business choose Hitachi Capital Invoice Finance?
Although they already had an invoice discounting facility with another provider they found that the funding limit wasn’t high enough to support their needs as they grew and the levels of flexibility and client service did not match what the price they were paying. As a result they sought quotes from a range of alternative invoice finance providers and came to the conclusion that Hitachi Capital Invoice Finance were offering the best product and service for their company’s needs.
How does the invoice finance facility work?
Once the agreement is in place, invoice finance is really straightforward. In this instance, the freight company services contracts as normal, and when they raise an invoice, they send a copy to us here at Hitachi Capital Invoice Finance. We then pay a proportion of the value of the invoice (85% in most circumstances) straight into the freight company’s bank account. When the invoice is paid by the customer, we receive a small fee for interest, and the remainder of the value of the invoice goes to the freight company.
Do freight companies often use invoice finance?
Invoice finance is used by companies of all sizes, from lots of different industries. However, it suits certain types of business and certain markets better than others. When it comes to freight, there can be significant operational costs, from staffing, to fuel, vehicle maintenance and more. This means that it’s really important for these types of company to have a steady flow of cash, which can be disrupted by slow paying customers. Invoice finance can remedy this.
Are all types of invoice finance the same?
No - in this instance the freight company used invoice discounting, but there are actually two main types of invoice finance. Invoice discounting is the option chosen when a business is looking for a confidential facility. Businesses than need help with their credit control might instead opt for invoice factoring, which is where we at Hitachi Capital Invoice Finance would manage the collections process. Find out more about the differences between factoring and discounting here.