When looking for a business funding facility, a key consideration for a business owner is whether they should employ a Bank Overdraft or use an Invoice Finance Facility instead.

The main problem with a traditional Bank Overdraft is the limit is usually fixed and, should more be required, you generally have to go through the whole application process again resulting in more time and cost. Also, not enough business owners appreciate that a significant problem is that an overdraft is repayable on demand and can be withdrawn at anytime.

So, is Invoice Finance a better option than a bank overdraft?

• It generates more cash than an overdraft – typically twice as much. And investing the cash back into the business can lead to increased sales and increased profit.

• The solution is linked to your sales, not your historic balance sheet and will therefore grow with your business - meaning you don’t have to keep going back to the bank asking for more.

• Less personal security is required meaning there is no need to put up your home as security.

• As it’s not based on historic balance sheet performance, it is therefore useful for businesses that are young, in a turnaround situation or that are more highly geared.

• Financial stability is more certain, as funding agreements are for a fixed period and are not repayable on demand.

• Increased flexibility of Invoice Finance rather than a fixed limit overdraft, means that small delays in payments from customers are automatically cushioned and not dramatically impacting cashflow

Invoice Finance gives a much safer and more flexible funding solution for many SMEs simply by providing certainty of contract (i.e. not repayable on demand), increased funding linked to sales not historic financial performance and not tying up personal security. And all this can come at a cheaper cost than a Bank Overdraft when compared on a like for like basis.