Invoice Discounting Services
 

Invoice Discounting
Examples

Invoice discounting case studies

Examples of invoice discounting brokered on behalf of clients. We work professionally to broker the most appropriate business finance, financing and funding solutions. We have introduced many companies to cheaper sources of finance and lenders that are more flexible and understanding of a particular clients needs. These are examples of our actual arrangements of finance and funds for MBO and acquisition, growth schemes, refinancing, working capital for UK companies.

Invoice Discounting Example 1

Deal Type:
Construction Finance
Industry Sector:
Plastering & Dry Lining
Turnover: £15m

The company was under pressure to repay its overdraft after the bank became aware of a build up of PAYE arrears. This in turn was a result of the business being undercapitalised due to a restricted bank overdraft of only £350k compare with a debtor ledger of £1.8m, excluding retentions.

A detailed review was undertaken of the company's current contracts and debts outstanding by a specialist firm of chartered surveyors plus a full financial review paying particular attention to outstanding creditors.

The invoice discounter agreed to provide a confidential construction finance facility of £750k which was sufficient to clear the arrears of Vat and provide a working capital facility that was much more appropriate to the company's needs.

Invoice Discounting Example 2

Deal Type:
Replacement Facility
Industry Sector: Recruitment
Turnover: £750k

A new start up eleven months ago and on target to achieve first years turnover of £750,000

The problem was a poor choice of factor at the outset. Despite the promise of a full factoring service including sales ledger management (with fees to match) the customer found itself having to chase the debts which the factor had allowed to run out to 80/90 days. This was having a serious impact on cash flow at a time when the business was growing rapidly. The directors needed to act quickly and contacted us for help.

We were able to asses the situation within a few days and arranged for an audit to be competed within 5 days. The existing funder was repaid the following week.

The company was doing so well we were able to persuade the lender to replace the factoring facility with a confidential invoice discounting facility at cheaper cost.

Invoice Discounting Example 3

Deal Type:
Construction Finance
Industry Sector: Re-furbishment Business
Turnover: £45m

The company specialised in the re-furbishment of commercial, office and industrial premises throughout the UK. The bank would not increase the overdraft limit beyond £500k which was totally inadequate in relation to both current and anticipated future needs.

The business had total debtors of over £5m, including retentions, with a further £3.5m of work in progress and applications for payment awaiting certification.

A niche invoice finance provider was introduced that undertook a full financial/cash flow sensitivity review coupled with a detailed review of all the company's current contracts and debts outstanding by a specialist firm of quantity surveyors.

This enabled the lender to provide a £2m confidential construction finance facility secured against contract debtors including applications for payment under contract, both JCT and Framework.

The business can now tender for new contracts safe in the knowledge that it has sufficient working capital to meet all its needs.

Invoice Discounting Example 4

Deal Type:
Acquisition and MBO
Industry Sector: Textiles
Turnover: £28m

This family owned textile business has been established for over 100 years. It makes yarns for the carpet industry and two years earlier had moved out of its former textile mill into a single story purpose built factory of 200,000 ft2.

Unfortunately the move proved much more difficult than anticipated and far longer to complete. At the same time they decided to install a new production line costing £1m and there were many teething problems. As a result the business incurred significant extra costs and these coupled with the disruptions to production and a reduction in sales from £11m to £9m lead to huge losses. The business was close to bankruptcy.

The sales director decided to arrange a Management Buy Out with the Managing Director of a much larger textile business and despite the deteriorating trading history we were able to arrange finance comprising a £2m invoice discounting facility, a £1m commercial mortgage and £450,000 of asset finance.

The new management quickly got to grips sorting out the company's problems and in the space of only two years a loss of £900,000 was turned round to a profit of £250,000. Since then we have provided increased asset finance lines of £4m and the invoice discounting facility has increased to £6m.

The business is now turning over £28m plus and generating profits of £500k - £1m per annum.

Invoice Discounting Example 5

Deal Type:
Single Invoice Finance
Industry Sector: Software
Turnover: £1m

This highly experience software development company backed by £20m of venture capital funding was ready to launch a new product into the hugely important internet security sector.

The trouble was the business was in its early stages and it had not yet reached break even on turnover of £1m. Also, whilst the first years sales for the new product were anticipated to be US $1m it was all to one customer, based in America.

The majority of invoice discounting companies in the UK will not look at single invoice finance and of the few that will, "software" is a dirty word. Fortunately, we knew from experience what the problem areas were and, despite the fact that we were in effect looking for a single invoice "export" facility we found a lender able to provide the discounting facility required.

Invoice Discounting Example 6

Deal Type:
Structured Finance
Industry Sector: Engineering
Turnover: £10m

This engineering business was formerly part of a much larger publicly listed company. A management buyout had been arranged two years earlier with the assistance of £1.75m of loan stock provided by Venture Capitalist (@ 14% pa) plus a further £1m via a sale and leaseback facility secured on unencumbered plant and machinery.

The company had a very good first years trading but then its major customer (60% of turnover) decided to move to "World Sourcing" and cut its orders significantly. Needless to say the company's bank was nervous and unwilling to help. They were recommended to us by another of our clients and we were able to re-structure their borrowings to include an Invoice Discounting facility at a fixed charge of only £7,600 pa and we re-mortgaged their property to also release additional working capital.

This re-structuring gave the company the time to find new customers to replace the missing sales and it also decided to move into new markets to further spread the risk of ever being in the same position again. Now no one customer represents more than 15% of turnover.

In the last 3 years the company has gone from strength to strength, has repaid all of its expensive loan stock and we have provided further finance for them to move to a new and larger factory, plus asset finance for new machinery and funding to help with establishing a new manufacturing facility in Eastern Europe.

Invoice Discounting Example 7

Deal Type:
Funding for Growth
Industry Sector: Haulage & Distribution
Turnover: £1.5m

A successful Scottish haulage, storage and distribution business with a dedicated team focused on customer services issues. It had a very well established customer base and an excellent name for delivering on time.

A few finance director identified a cash flow problem which was preventing the business from taking on large contracts and growing to its full potential. With several new contracts worth £1m secured with blue chip clients a more flexible funding solution than the bank could proved was required.

We were able to source an invoice discounting facility with an advance level of 85% giving the company the liquidity it needed to invest in new vehicles and fund its working capital needs for the future.

Invoice Discounting Example 8

Deal Type:
MBO - Re-finance
Industry Sector:
Importer & Distributor of Carpets
Turnover: £4.5m

This business had been subject to a management buy-out (MBO) three years before our introduction having seen a once dominant market position eroded by complacent management and the withdrawal of working capital facilities by a struggling parent. The MBO was financed out of working capital (invoice discounting and bank overdraft) rather than equity and hit problems after just 6 weeks when the main funder refused to allow the first trance of deferred consideration to be paid.

With the director's keen not to default on the buy-out terms, they were made to repay the deferred consideration of £1m as well as the £2m working capital facilities over the following 9 months. This was largely financed by trade creditors and a replacement invoice discounting facility capped at £750k. Over the following 2 years, the restrictions imposed by the £750k limit, together with the refusal of the discounter to finance stock, resulted in unfulfilled orders and continuing losses.

To overcome the problem we were able to arrange alternative facilities incorporating a £1.3m factoring facility including stock finance plus a trade finance line to fund pre-sold orders. This gave the company all of the working capital it had previously been starved of and enabled the directors to turn the business round. Within six months the factoring facility was converted to invoice discounting.

Additionally, we introduced:

1. New accountants (the incumbent auditors had done little to help since brokering the MBO finance for a substantial fee).
2. Venture capitalists to consider institutional investment.
3. Restructuring specialists to counsel the directors on insolvency issues.

Invoice Discounting Example 9

Deal Type:
International Working Capital Facility
Industry Sector: Engineering
Turnover: £30m

This 40 year old business is part of a major international group with a strong global market position supplying the commercial vehicle market. It has a strong market presence located in UK, Sweden, Germany, India, China and the USA.

The company has experienced substantial growth in recent years and worldwide demand for its products shows no sign of slowing down. Competitors are unable to match the product quality or service levels provided.

With the export content at 95% the existing lenders were beginning to be restrictive in the facilities they were providing and the company became increasingly concerned that this would impact on future growth potential.

The parent company wanted to be able to utilise working capital on a group wide level and we were able to source a £4m invoice discounting facility which enabled them to achieve this.

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