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Working with your business

Invoice Finance is a flexible form of finance that suits a spectrum of companies, explains Mike Rose, Head of Invoice Finance Product Sales, Santander Corporate Banking.

Q: What is invoice finance?

A: Invoice finance is a form of finance made available against the value of a business’s trade receivables, essentially it releases a percentage of the funds tied up in unpaid invoices. The bank make a prepayment of up to 85% against the value of an invoice. At Santander we’re also able to extend financing alongside receivables to inventory and plant and machinery assets.

Q: In what situations would you recommend invoice finance to a business?

A: Invoice finance can be used in a number of ways – to support new start up ventures, fast-growing SMEs, or large corporate organisations, which want to take advantage of cash flow fluctuations. It offers an accelerated form of working capital finance.

Q: Are there any situations in which invoice finance would not be a preferred option?

A: Examples include where the nature of a customer’s business is contractual and subject to stage payments, or if invoice credit terms exceed 100 days or more. Also, if the assets we are looking to fund are subject to an existing charge, which wouldn’t be released by the incumbent charge-holder.

Q: What benefits does invoice finance offer a business?

A: It’s a cost-effective alternative, providing fast access to working capital. Finance grows in line with your business, and it’s more flexible than traditional lending, coping better with cash flow fluctuations.

Q: Are there any risks associated with this product?

A: The level of finance is restricted to sales volumes – this may not appeal to businesses with frequent turnover spikes.

Q: Is there anything a business can do to increase their chance of gaining approval for this product?

A: Make sure you have very good credit control activity, maintain solid audit trails and robust sales and purchase ledger management, and operate sound account systems.

Q: What makes Santander’s approach to lending different?

A: It is imperative that we understand the businesses we work with. Our charges are fully transparent – there are no hidden fees, facility management is fully-documented, plus you get daily support from a dedicated Relationship Director. We work with businesses during the good times and support them during turbulent times.

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John Carroll - Helping businesses achieve International success. Head of Product Management & International Business, Santander UK