Introduction

The Government has announced a new initiative to help diversify business finance which will be led by UK industry experts from both the business and finance sectors.

UK businesses still rely heavily on bank funding to help finance their business activities even though there are many alternative sources of funding available to them in today’s ever changing financial marketplace.

The Government wants to ensure, in light of recent and current banking reforms, that the flow of finance to businesses is maintained. Alternative sources of finance will be crucial to help businesses deliver the wider economic growth the UK economy needs.

The panel of experts will seek to establish a framework of alternative finance sources by working with businesses and business investors, financial institutions and providers of alternative finance to coordinate and facilitate the availability of funding that businesses need.

Bank lending

Even though there has been a recorded increase in new lending from the largest banks this year many businesses are still unhappy with bank lending levels and how they have been treated by their banks.

Tighter lending criteria, non-renewal of overdraft facilities and poor communication by the banks are the common problems cited by businesses as making their funding objectives difficult to achieve.

Without the finance they need, UK businesses struggle to survive and grow, and so the UK economy does the same. This is why the Government is not only introducing schemes to increase bank lending but is also keen to encourage as much competition in the financial market as possible and provide a wide range of alternative sources of finance to UK businesses.

Alternative finance

There is already a wide range of alternative finance sources available to businesses.

One of the biggest barriers to increasing the take up of these sources of finance is simply general awareness. New and emerging providers of alternative financial products do not have the branch infrastructure that makes for the efficient and effective distribution of their products.

The other important factor here is that many owners and managers of small and medium sized businesses, which are the backbone of the UK economy, are unaware of the range of alternative finance available and where to find it.

New methods of communication are required and it is hoped this will be a key objective of the Government’s initiative.

Invoice Finance

Invoice finance is one of the most popular options in the alternative finance portfolio and has grown over the last fifteen years from about 13,000 companies using it in the UK to over 50,000 companies now.

This extremely flexible method of business finance advances funds against unpaid sales invoices. There are variations within the invoice finance family of products which includes invoice factoring and invoice discounting.

The invoice finance lenders will advance up to 95% against a company’s unpaid sales invoices and use the sales ledger as security by taking assignation of the invoice and so the outstanding debt is effectively owned by them.

When the invoice is paid by the company’s customer the invoice finance company will pay over the balance of the invoice that has not been funded after deducting their fees. There is usually a charge for the facility and an interest charge for the amount of funding advanced.

One of the main benefits of invoice finance is that the facility will grow as the business grows thus making it a very effective method of funding working capital.

There is a reason why accounts receivable financing is a four thousand year old financing technique: it works. Accounts receivable financing, factoring, and asset based financing all mean the same thing as related to asset based lending- invoices are sold or pledged to a third party, usually a commercial finance company (sometimes a bank) to accelerate cash flow.

In simple terms, the process follows these steps. A business sells and delivers a product or service to another business. The customer receives an invoice. The business requests funding from the financing entity and a percentage of the invoice (usually 80% to 90%) is transferred to the business by the financing entity. The customer pays the invoice directly to the financing entity. The agreed upon fees are deducted and the remainder is rebated to the business by the financing entity.

How does the customer know to pay the financing entity instead of the business they are receiving goods or services from? The legal term is called “notification”. The financing entity informs the customer in writing of the financing agreement and the customer must agree in writing to this arrangement. In general, if the customer refuses to agree in writing to pay the lender instead of the business providing the goods or services, the financing entity will decline to advance funds.

Why? The main security for the financing entity to be repaid is the creditworthiness of the customer paying the invoice. Before funds are advanced to the business there is a second step called “verification”. The finance entity verifies with the customer that the goods have been received or the services were performed satisfactorily. There being no dispute, it is reasonable for the financing entity to assume that the invoice will be paid; therefore funds are advanced. This is a general view of how the accounts receivable financing process works.

Non-notification accounts receivable financing is a type of confidential factoring where the customers are not notified of the business’ financing arrangement with the financing entity. One typical situation involves a business that sells inexpensive items to thousands of customers; the cost of notification and verification is excessive compared to the risk of nonpayment by an individual customer. It simply may not make economic sense for the financing entity to have several employees contacting hundreds of customers for one financing customer’s transactions on a daily basis.

Non-notification factoring may require additional collateral requirements such as real estate; superior credit of the borrowing business may also be required with personal guarantees from the owners. It is more difficult to obtain non-notification factoring than the normal accounts receivable financing with notification and verification provisions.

Some businesses worry that if their customers learn that a commercial financing entity is factoring their receivables it may hurt their relationship with their customer; perhaps they may loose the customer’s business. What is this worry, why does it exist and is it justified?

The MSN Encarta Dictionary defines the word worry as:

“Worry

verb (past and past participle wororied, present participle wororyoing, 3rd person present singular worories)Definition:
1. transitive and intransitive verb be or make anxious: to feel anxious about something unpleasant that may have happened or may happen, or make somebody do this

2. transitive verb annoy somebody: to annoy somebody by making insistent demands or complaints

3. transitive verb try to bite animal: to try to wound or kill an animal by biting it

a dog suspected of worrying sheep

4. transitive verb

Same as worry at

5. intransitive verb proceed despite problems: to proceed persistently despite problems or obstacles

6. transitive verb touch something repeatedly: to touch, move, or interfere with something repeatedly

Stop worrying that button or it’ll come off.

noun (plural worories)Definition:
1. anxiousness: a troubled unsettled feeling

2. cause of anxiety: something that causes anxiety or concern

3. period of anxiety: a period spent feeling anxious or concerned…”

The opposite is:

“not to worry used to tell somebody that something is not important and need not be a cause of concern (informal)

Not to worry. We’ll do better next time.

no worries U.K. Australia New Zealand used to say that something is no trouble or is not worth mentioning (informal)”.

Query: if a business is financing their invoices with accounts receivable financing, is this an indication of financial strength or weakness? Query: from the point of view of the customer, if you are buying goods or services from a business that is factoring their receivables, should you be concerned? Query: is there one answer to these questions that fits all situations?

The answer is it’s a paradox. A paradox is a statement, proposition, or situation that seems to be absurd or contradictory, but in fact is or may be true.

Accounts receivable financing is both a sign of weakness with regard to cash flow and a sign of strength with respect to cash flow. It is a weakness because, prior to financing, funds are not available to provide cash flow to pay for materials, salaries, etc. and it is an indication of strength because, subsequent to funding cash is available to facilitate a business’ needs for cash to grow. It is a paradox. When properly structured as a financing tool for growth at a reasonable cost, it is a beneficial solution to cash flow shortages.
If your entire business depended on one supplier, and you were notified that your supplier was factoring their receivables, you might have a justifiable concern. If your only supplier went out of business, your business could be severely compromised. But this is also true whether or not the supplier is utilizing accounts receivable financing. It’s a paradox. This involves matters of perception, ego and character of the personalities in charge of the business and the supplier.

Every day, every month thousands of customers accept millions of dollars of goods and services in contracts that involve notification, verification and the factoring of receivables. For most customers, “notification” of accounts receivable financing is a non-issue: it is merely a change of the name or addresses of the payee on a check. This is a job for a person in the accounts payable department to make a minor clerical change. It is a mainstream business practice.

Bobby McFerrin wrote and performed a song called “Don’t Worry, Be Happy” for the movie “Cocktails” starring Tom Cruise. The song was a number one U.S. pop hit in 1988 and won the Grammy for Best Song of the Year. Here are the lyrics:

There’s a popular misconception that dentistry has to be serious. Not true. After all, your dentist is there to help you achieve and maintain a healthy, happy smile! With this in mind, keep reading to learn a few jokes that are sure to bring a smile to your and your dentist’s faces.

3 Dentistry Jokes for Kids

If you’re a bit nervous about your upcoming visit or want to break the ice by telling your dentist a fun joke, then these are perfect:

Whose job is the most dangerous in Transylvania? The dentist who works on Dracula.

What’s the dentist’s favorite kind of dinosaur? A floss-iraptor.

What do you call a bear with no teeth? A gummy bear.

3 Dentistry Jokes for Teens

If the previous jokes were a bit too young for you, don’t worry – there are plenty of other jokes you can use, including:

What award did the dentist win? A little plaque.

What do dentists call the x-rays they take of patients’ teeth? Tooth pics.

My teeth were stained, so the dentist asked me, “do you smoke or drink coffee?” I told him I drink it.

3 Punny Jokes for Everyone

If you love a good pun (who doesn’t?) then these are perfect for you:

I have to have a root canal done. Just the thought of it is unnerving.

My dentist has a TV in the exam room. I go there for Netflix and drill.

The lawyer asked his dentist to give him a retainer.

Did any of these put a smile on your face? Then don’t hesitate to share it with your dentist at your next checkup and cleaning. After all, what better way to start your appointment than with a smile?