Invoice discounting made easy

Late pay­ment can be night­mare for small and medi­um-sized firms. The annu­al late pay­ment study by Sage shows near­ly two-thirds of com­pa­nies wait more than 60 days for pay­ment and half wait more than 90 days. It’s caus­ing one firm in ten to be unable to pay sup­pli­ers. That’s more than an annoy­ance. It’s a mat­ter of keep­ing the busi­ness afloat.

The obvi­ous solu­tion to late pay­ment is invoice dis­count­ing. Com­pa­nies sell invoic­es for cash in hand, albeit slight­ly less than the full amount due. Small and medi­um-sized enter­pris­es (SMEs) have been using invoice trad­ing to smooth out cash flow for years. It’s a main­stream method of finance recog­nised by major accoun­tan­cy bod­ies such as CIMA and ACCA.

Until recent­ly there has been a down­side to invoice finance and fac­tor­ing – high charges. Banks that offer the ser­vice have expen­sive over­heads to pay. They do so by pass­ing costs on to cus­tomers. Fur­ther­more, their charges are not always trans­par­ent. Com­pa­nies are hit with reserves or unex­pect­ed pro­cess­ing and han­dling fees, push­ing up the cost.
For­tu­nate­ly, a new provider is set to low­er the cost of invoice dis­count­ing. Invest­ly is an online peer-to-peer mod­el. Com­pa­nies release the cash tied up in their invoic­es by sell­ing them at a small dis­count to investors. The low­er cost of run­ning the dig­i­tal plat­form means com­pa­nies get superb rates.

Invest­ly uses a reverse auc­tion to deter­mine the dis­count lev­el. Investors bid on invoic­es, with each bid low­er­ing the dis­count rate. After two days the auc­tion ends and the com­pa­ny is giv­en the amount in cash, minus the dis­count. The investors, who are pre­pared to wait for the invoice to be set­tled, get a return on their invest­ment in the long run.

There are no extra or hid­den charges with Invest­ly. For exam­ple, if a busi­ness has an invoice of £10,000 for sale and the pay­ment term is 30 days, a final sale price may be reached in the auc­tion at £9,850. The sell­er or invoice own­er will be for­ward­ed the agreed £9,850, while the remain­ing £150 will go to the investors, with Invest­ly get­ting a fee as a pro­por­tion of this total.

The plat­form has a proven pedi­gree hav­ing been offer­ing its ser­vices in Esto­nia since 2014. It recent­ly raised fur­ther invest­ment from ven­ture cap­i­tal group Speed­in­vest, an Aus­tri­an-based ven­ture cap­i­tal fund, which invests in seed-stage star­tups around Europe. Ste­fan Klestil and his part­ners at Speed­in­vest are known for their suc­cess­ful invest­ments in finan­cial tech­nol­o­gy, such as Lon­don-based Curve and Ger­man suc­cess sto­ries Wire­card and Number26.

Mr Klestil says: “Invest­ly is mak­ing finance much more acces­si­ble and con­ve­nient, espe­cial­ly for small­er busi­ness­es that are suf­fer­ing from lack of access to work­ing cap­i­tal. We know that we are able to help make Invest­ly into a glob­al suc­cess sto­ry.”

A key part of Investly’s appeal is the user expe­ri­ence. Ruth Cham­ber­lain of Invest­ly adds: “We have made it as sim­ple as pos­si­ble to use Invest­ly. There is a quick three-step process for com­pa­nies to reg­is­ter and just one fee. We give com­pa­nies con­trol and clar­i­ty over the entire invoice dis­count­ing process.”

There is a strong empha­sis on cus­tomer sup­port. Invest­ly gives busi­ness­es guid­ance through phone, e‑mail and web-chat. The founders are on-hand to pro­vide per­son­al guid­ance for com­pa­nies who are think­ing of sign­ing up.

So many com­pa­nies could ben­e­fit from hav­ing the flex­i­bil­i­ty to release cash from their invoic­es when they want to

High-net-worth indi­vid­u­als and sophis­ti­cat­ed investors are cur­rent­ly sign­ing up to par­tic­i­pate on the Invest­ly plat­form. They and users are pro­tect­ed by a cred­it-scor­ing sys­tem, which draws on mul­ti­ple data sources to pro­vide a risk pro­file for each bor­row­er.

The goal now is to show­case Invest­ly to SMEs who are either fail­ing to make use of invoice dis­count­ing or rely on the old high street bank providers.

Ms Cham­ber­lain of Invest­ly con­cludes: “So many com­pa­nies could ben­e­fit from hav­ing the flex­i­bil­i­ty to release cash from their invoic­es when they want to. A fash­ion label, which expe­ri­ences sales spikes after a new col­lec­tion, may need to smooth out cash flow. Or a com­pa­ny seek­ing to expand can obtain cash to invest in new equip­ment and staff. We can help those com­pa­nies access work­ing cap­i­tal to accel­er­ate their growth.”

For more infor­ma­tion go to Investly.co