How to Use Invoice Factoring and Survive the Recession

Its official the British Nation is now in financial recession and businesses need to have a robust map to navigate this economic downturn or they are destined to go into administration.

A record number of companies and shops went into insolvency over the Christmas period caused by the really awful trading conditions.

Stores and Companies to be effected by the recession are Savvi the music retailer formerly Virgin Megastore, Adams the Independent childrens clothes retailer, USC the Fashion store and Whittard of Chelsea, the specialist tea and coffee retailer.

Possible one of the most high profile causalities of the economic collapse has been woolworths that went into administration in December 2007 and finally closed all retail outlets in January which has put 27,000 out of work.

Businesses wishing to survive the recession need to have 4 things; credible management team, a viable business core, a valid business plan and appropriate funding say The Turnaround Management Association

British Business is now facing a Cash Flow restriction caused by the credit crunch and and freeze in the capital markets forcing Companies to search out alternative sources of funding

As a business owner one of the first things you should do to survive a economic downturn is cut costs. Carefully review expenditure to identify any areas of your business where savings can be made. Look at distribution costs, advertising, marketing, business location and even the smallest things such as turning off the office lights at the end of the working day. Simple measures can give rise to immediate benefits for little or no pain.

Business owners interested in surviving a recession should look for alternative and appropriate sources of finance. The old clich of cash is king has never been more important than at the present time, although most businesses nowadays rely on some form of third party funding whether it be bank overdraft or business loans. Now may be the time to consider alternative forms of funding such as invoice factoring, which is increasingly popular for small to medium businesses. While not suitable for all businesses, the huge benefit of invoice factoring is that rather than have money tied up in invoices that are yet to be paid, you can receive an initial payment up front, typically 80% – 85% of the gross value, and the remainder when the customer pays the invoices to an invoice factoring provider, less the service fee which has been negotiated with them. However, if the customer defaults on payment, then the factoring company will recover the money provided to you initially from any further invoices which are factored. This can lead to random cash flow if customers are slow payers or they go into insolvency.

Invoice Factoring is provided by the Asset Based Finance team of Enable Finance Ltd. Enable Finance are professional corporate finance company providing British business access to traditional and alternative sources of finance. For a free meeting please contact the Business Refinance Team.