Call us: 03330 113622

Blog home
Categories
Popular Posts
Recent Posts
Archive

• 20 Nov

  Are Revolving Credit Lines More Popular Than Single Invoice Finance

  Which is more popular single invoice finance (SIF) or revolving credit lines? Our experience, as detailed below, is that the majority want revolving credit, with a more modest niche demand for SIF.

  COMPARE INVOICE FINANCE QUOTES

  Definition Of Single Invoice Finance & Revolving Credit Lines

  It's probably best to start with brief definitions of what these terms mean (see our free receivables financing guide for more information). Single invoice finance (SIF - often called selective invoice finance) is where the supplier using the facility can pick and choose invoices to submit to the invoice finance company for funding (and a credit control service in the case of spot factoring). There are not usually any minimum turnover or minimum fees imposed. Termination can be at any time, by simply not using the service again.

  See a related case study about Factoring 1 Invoice.

  Revolving credit lines, in the context of receivables financing, are often called whole turnover facilities and are where the supplier (the client of the finance company) submits all their invoices to the invoice finance company for funding (and credit control services in the case of factoring). There is normally a minimum monthly fee for this type of facility, although it is normally set at a level that the company will easily exceed. Termination normally requires a period of notice, in some cases, it can be very short e.g. a month. In other cases, it can be several month's notice of termination.

  The fees to fund any invoice under a single invoice arrangement tend to be proportionately higher than they would be for that same invoice under a revolving facility. With revolving facilities, the customer tends to get a discount on the fees, as they are submitting all their invoices (a kind of bulk discount). However, users can carefully control the costs with SIF by picking and choosing the transactions to include.

  SIF has only become available in the last few years, for many years all receivables financing facilities were for the whole turnover.

  Historic Research

  Some time ago we conducted some research where we asked a sample of randomly selected SMEs whether they thought businesses would prefer SIF, or invoice finance that included all their invoices. We found that 37% thought that businesses would prefer selective facilities, and 63% thought that whole turnover facilities would be preferred. This suggested that there was a market for the selective facilities that were emerging at that time.

  Trading Volumes

  Since then, we have seen a number of new invoice finance providers entering the market, many of them offering only SIF. Sometimes, being brokers, we have been contacted by almost one new SIF provider a week - seeking new introductions. However, many of these providers are small, with only a few clients - many sit outside of UK Finance, the main UK trade body for the receivables financing sector. The majority of the clients attributed to members of UK Finance (formerly the ABFA) are thought to be whole turnover users.

  One of the largest of the UK SIF providers, outside of UK Finance originally started out offering only SIF to clients when they launched and then diversified to offer the provision of whole turnover facilities, and thereafter, business loans. They have funded significant volumes of invoices since inception, which whilst a huge achievement is still less than the overall volumes transacted by the UK Finance members.

  Our Experience At FundInvoice

  At FundInvoice, we have arranged many SIF facilities for customers, but whole turnover remains the lion's share of the enquiries that we see. We offer the full spectrum of receivables finance facilities, with no bias as to which facilities are offered. Back in 2018 to the 20th of November, we found that only 16.9% of the enquiries that we dealt with were for SIF (with some element of transaction selectivity required), and the remaining 83.1%% wanted a whole turnover style facility encompassing all transactions.

  So the demand that we have seen is largely for revolving credit facilities rather than SIF. Despite this, there remains a clear niche requirement for SIF.

  By Glenn Blackman