Invoice Finance for Rail Contractors

Invoice Finance for Rail ContractorsInvoice Finance for rail contractors is a perfect funding solution if you are running a growing business with a significant amount of money tied up in your debtor ledger through unpaid invoices.

The problem becoming greater and holding you back the faster your business grows? This is where invoice finance for railway contractors can help.

We truly believe that the rail network sector is one of the most important sector for the future growth of the UK economy. With new projects coming on such as Crossrail, East West rail, Great North Rail project, Transpennine route upgrade and HS2.

UK rail enhances by up to £10.2bn per year into the economy, while the railway and its supply chain support 216,000 jobs across Britain.

What is rail contractor business finance?

For the railway contracts who operate their services under a railway industry commodity classification list or work as sub contractors to other businesses that do, invoice finance is beneficial to keep a steady cash flow and meet the high cost demands of this type of business. When you are regularly waiting for clients and suppliers to pay their invoices it can put huge pressure on your business potentially making it difficult to meet high day-to-day running costs and the quick turnaround times required in this industry.

Invoice finance will ensure you do not have to wait 30, 60, or 90 days to get paid, funds are available once you have issued an invoice to your client.

Why rail sub contractors should consider invoice finance

Invoice finance is an essential financial option for any business or agency that offers services to support the rail network and requires funds to grow or just to ensure there is enough working capital within the business.

We know the importance of making sure that your staff are paid correctly and on time, even when your clients haven’t yet paid for your services. There is other costs, like sub contractors, plant hire and allied agencies that all help to deliver your service.

By using an asset based lending product such as invoice finance within your business could be the answer for a positive cash flow within the business. We also understand that your workers and suppliers will need paying much quicker than the standard 30 days your clients will take to pay you; potentially causing cash-flow issues.

Asset based lending is a perfect fit for any business, it can fill the cash flow hole by advancing up to 95% of the value of the outstanding account once it has been issued to the client. Once you have completed the job and the invoice has been issues to the client, the factor provides the balance of the statement of charges, minus fees.

Businesses have to wait to be paid so 30, 60 or even 90-day payment terms can cripple you financially, this is where our finance will support your business. You can finally sleep at night and no longer worry about cash flow issues.

Types of invoice finance for railway support sector:

The needs of the rail network industry tend to vary according to growth stage and their specialist industry sector. To help you work out which type of finance will suit your business, here is a brief guide to the three main options:

Invoice discounting

Invoice discounting for rail subcontractors is a confidential finance facility when a company’s unpaid invoices are used as collateral for a loan. Invoice discounting companies enable businesses to leverage the value of their sales ledger.

With an invoice discounting company, when sending out invoices to customers a proportion of the total amount becomes available from the lender, which provides your business with a source of working capital throughout the month while you wait for your client to pay their bill.

The benefit of invoice discounting is you maintain responsibility for your sales ledger as well as any outstanding amounts chased and invoice processing. The main difference between this method and invoice factoring is that your customer is not aware that you have taken on cashflow finance. If you prefer to keep the financial arrangement confidential from your customers then discounting may be the right product for you.

You no longer have to wait up to 120 days to receive settlement for your services, and you remain in charge of your own credit control processes, meaning that you continue to chase late payments and therefore your customers are not made aware of any third party involvement.

Invoice factoring

Invoice factoring for companies that support the rail industry is when a business sells its sales ledger to a third-party company. It’s a form of factoring finance and will give your business an effective way to improve its cashflow position.

How does invoice factoring work, the lender will provide the credit control service to recover payment of the unpaid invoice.

Factoring companies allow you to release cash from your unpaid invoices quicker than having to wait between 30 to 90 days – and sometimes up to 120 days – for your customers to pay you.

The invoice factoring provider we handle credit control on your behalf, allowing you to concentrate on other areas of the business instead of chasing up late payments.

Spot factoring

Spot factoring for businesses that support the railway industry is a way for a business to access funds by selling unpaid sales debts to a 3rd party, a spot factoring company, on a one off basis in order to receive payment quicker.

The business will agree rates and fees with a spot factoring company and then decide which account it wants to assign to them. The spot factoring company, once your bill for services that have been completed is verified, will advance a proportion of its value, usually around 70-85%, to the business.

The spot factoring company will then chase up the amount from the client and once paid to them in full will reimburse the business with the outstanding balance minus the agreed fees.

Benefits of railway contractor finance

  • Cash released in 24 hours after invoices are raised
  • Receive up to 95% of the invoice amount
  • Credit control can be fully managed or confidentially kept in-house
  • Improves cash flow for your business
  • Negotiate better terms with your suppliers
  • Bad Debt Protection can be added to protect against non-payments

It allows you to release funds against the value of invoices within 24 hours of their issue. This means that, rather than wait for your customers to pay, you gain immediate access to cash that can be used to keep the business running as usual, or to grow your business with new clients and contracts.

When it comes to finding the right type of invoice finance for your business, you may find either invoice factoring or invoice discounting provide a better fit.

With invoice factoring the funder will additionally manage your sales ledger on your behalf, with their credit management resource and expertise reducing in-house overheads and improving collection times in general.

How does rail sector finance work?

For any business that supports the rail industry, railway business support fuinance works by allowing firms to bridge the gap between paying suppliers, sub contractors and merchants and getting paid by your clients.

  • You supply your services or goods to your customers.
  • Send your customer a request for payment and send a copy to the finance company or upload to the online portal.
  • The lender will advance up to 75% of the outstanding amount.
  • Your customer settles the amount in full.
  • The payment clears and we give you the remaining 25% balance minus the finance fee.

How much do rail contractor factoring companies charge?

Railway contractor and sub-contractor factoring companies charge in accordance to a number of different factors, so their factoring rates and costs are unique to each client using a variable fee structure.

In most cases some factoring companies will offer a flat fee structure, their total cost will be primarily based on two thing, the discount/factor rate that they offer you and the second the length of factoring period.

Who is eligible for industry finance?

Eligibility for rail support industry finance is subject to status but not as strict as you may think, if the following apply to you:

  • You are registered in the UK

  • Minimum turnover £100,000

  • Issue invoices.

Why should you work with us

We are passionate about helping businesses in the UK, grow and sustain that growth through carefully selected funding solutions and financial services offerings.

As a specialists broker in all things funding we are sure we can find a facility that works for you and your business, to apply for finance the process is quick and easy, simply complete the online enquiry. If you prefer a call back please feel free to get in touch on the number above.

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Speed up your cash-flow today. Forget issues caused by slow-paying customers