Nucleus Commercial Finance is an invoice finance specialist with a difference: with our solutions there are no hidden costs. The fee is fixed so that SMEs know what they are getting and how much it costs. Every time.
We work with the leading Banks, Insolvency Practitioners, Accountants and Brokers to provide finance for growing businesses with revenue of up to £5 million.
So whatever the sector, and whatever the need, we can help with a fast, flexible and responsive service that provides the finance you need, exactly when you need it.
Invoice Finance is the generic terms used to describe a method of cash flow funding that uses an invoice as the principal asset, against which money can be raised. Typically, there are two kinds of Invoice Finance – Factoring and Invoice Discounting. The key difference between the two is that Invoice Discounting can be confidential.
Invoice Finance, whether factoring or invoice discounting, works on the same basic principle: the lender agrees to pay your business an agreed percentage of the invoice value as soon as that invoice is submitted, with the balance being payable when the invoice is settled in full. Nucleus Commercial Finance makes money by taking a fixed fee for the service it provides.
With Factoring, as well as advancing the cash, the lender usually also assumes responsibility for managing the sales ledger. It therefore tends to suit those smaller businesses that might not have their own in-house finance resource, and where the support of a third-party provider can help in collecting the cash.
With Invoice Discounting, the facility can be confidential and the business maintains control over its sales ledger. Businesses that use Invoice Discounting tend to be larger firms with more advanced in-house teams.
Both have the same major advantage: businesses get immediate access to their cash, and positive cash flow makes for a successful business. It also allows the businesses finances to grow as the business grows, rather than being restricted by traditional methods of lending.
Factoring is effectively the process of ‘selling’ your unpaid invoices for cash. As soon as the Factor (lender) receives a copy of your invoice, they effectively ‘buy’ that invoice from you at an agreed percentage of the invoice value and you receive the money straight away. The balance, less an agreed service charge, is paid when the customer pays, and the Factor undertakes all credit management and collections activity following an agreed credit policy.
Once you have fulfilled your customer’s order, you raise an invoice and a copy is sent to your Factoring partner. The Factor will make available to you the agreed prepayment percentage of the invoice value, less an agreed service charge. The Factor is then usually responsible for collecting the outstanding payment from the customer(s); however, there may be times when you want to manage the debt in-house. Once payment is collected, the Factor will credit your account with the remaining balance.
An immediate injection of cash. Rather than having to wait 60 or 90 days, or perhaps even longer, you will then have access to the money immediately to re-invest in your business. Having cash up front enables you to pay your suppliers more quickly, and negotiate better terms as a result, taking full advantage of supplier discounts for early settlement.
A further advantage of Factoring is that the credit management function, including collections, can be taken away from you. You are effectively outsourcing the sales ledger management to your Factor, allowing you to get on with what you do best – running your business – without the worry of not getting paid.
With Invoice discounting, the Invoice Discounter advances an agreed percentage of the invoice value. Invoice Discounting is confidential, such that the customer is unaware of the facility, but the supplier can remain responsible for all sales ledger administration.
Invoice discounting can only be provided where goods or services are supplied between one business and another on credit terms. Bad debt protection may be included in the facility, if required.
Invoice Discounting works in much the same way as Factoring, with one or two differences. With Invoice Discounting, your business sends a sales day book listing or uploads invoices to the discounter instead of copy invoices, and retains responsibility for running the sales ledger, issuing statements, collecting payments and chasing slow payers, if necessary.
You pay the money you collect into a special bank account (trust account) and notify the discounter. The discounter then pays you the balance of the invoice totals, less an agreed charge. Charges consist of a service fee as a percentage of your annual turnover and an interest charge on the funds advanced to you. The charges are negotiated with each business on a case-by-case basis.
Invoice Discounting suits those larger businesses with a higher turnover that are sufficiently experienced and resourced to be able to manage their own sales ledger and are looking at alternative (or additional) methods of borrowing. It is not untypical for Invoice Discounting to be used as a refinancing tool, or as part of a package of finance to facilitate a management buyout (MBO) or buy-in (MBI).
The principal advantage is that it gives your business an immediate injection of cash, usually within 24 hours, and the facility grows as your business expands. Having cash up front enables you to pay your suppliers more quickly, and negotiate better terms as a result, taking full advantage of supplier discounts for early settlement. It also has the advantage of leaving you in charge of your sales ledger.
Construction Finance is a dedicated cash flow-funding product designed specifically for those smaller businesses working in the cash-strapped construction sector.
Working directly in partnership with a team of experienced Quantity Surveyors who understand the intricacies of construction contracts, and using a fixed rather than variable fee model, Nucleus has removed the uncertainty for construction businesses associated with the costs of ‘traditional’ lending products that is their principal downfall.
With Construction Finance, we have created an innovative funding solution that is both practical and sustainable. It provides pre-payments against applications, stage payments and milestones for sub-contractors in construction or other industries where contracts with their customers have been a barrier to finance from traditional lenders.
The new product is based on a traditional factoring approach but with the Nucleus’ Fixed Fee model to ensure transparency on costs. Cash is advanced at an agreed percentage of the outstanding invoice / application value, taking into account the longer contract terms typical within the construction sector. It is typically targeted at businesses requiring funding of up to £2 million (cash out).
Please note the information on this page has been provided by Nucleus Commercial Finance.