Understanding Invoice Finance John Mackey
Content • Who we are? • What we do? • What is Invoice Finance? • Who can avail of Invoice Finance? • Industry Statistics • Case Studies • Questions
Who we are? Bibby Financial Services is the World’s Leading Independent Invoice Finance provider . We help SMEs to grow by providing funding solutions which are attuned to their ever changing needs.
What we do? Our product portfolio is based on understanding your business We work as an We create and deliver extension of your team tailored funding solutions Invoice Credit Discounting We move quickly Control We will help your so you can keep business reach its your plans full potential moving Bad Debt Export Protection Finance Funding Solutions New Start Recruitment Business Finance Full Finance Service Invoice Finance
What is Invoice Finance? An immediate and on-going supply of funds against outstanding invoices
Who can avail of Invoice Finance? Types of Businesses Business Structures • Businesses trading B2B • Limited Company • Trading on Credit Terms • Sole Trader • New Starts • Partnership • Mature Businesses • Sell & Forget Key Sectors • Haulage • Distribution / Wholesale • Services • Manufacturing
Industry Sector in Ireland Number of users of invoice finance The industries that are in high demand of asset based finance in Ireland include: Retail, Construction & Other (12%) Source: ABFA Industry Statistics Report Q3 2015
Case Study Business Type: Textile Manufacturing € 1.2 million Funding: € 3.5 million Turnover: The Company The Solution - Export Confidential A well-established Irish business in Invoice Finance facility • operation for over 100 years, Customers are based in Italy, Hong specialising in weaving high quality Kong, Japan and the UK • € 1.2m in funding to accommodate cloth for high end fashion houses worldwide. their busy period The Challenge This business had no bank borrowings • Mainly seasonal business with over and chose BFSI due to the speed at 70% turnover occurring between which the facility was set up (3 weeks) March and July and the fact that there were no • Major strain on cash flow restricting restrictions placed on the funding further growth of export debt.
Case Study Business Type: Nursing Home & Residential Care € 450,000 Funding: € 3million Turnover: The Solution – Disclosed Invoice The Company Established over ten years ago, this Finance Facility • € 220k funding released within 2 business operates a number of nursing homes in Ireland providing weeks enabling them to maximise services to the HSE from capacity and increase profits emergency/contract beds to longer term care under the Fair Deal scheme. The Challenge • Struggling to meet the monthly running costs of the nursing homes due to the extended credit terms with the debtor
Case Study Type of Business: Wholesale Distributor € 800k Funding: € 5million Turnover: The Company The Solution - Confidential Invoice This company is wholesale distribution Discounting (with disclosure on top of electrical good and kitchen utensils. debtor with 80% concentration) • They previously had a Confidential Structure a facility whereby we Invoice Discounting facility with one of could fund the main debtor to 80% the pillar banks. of the total ledger at a prepayment of 75% (70% with their previous The Challenge provider). • • Previous provider had restricted The facility has provided the business an additional € 150k in funding for the main debtor at 50% of the total ledger, thus 30% of their cash flow which had been tied up ledger was not being funded in restrictions on their previous facility
Case Study Type of Business: Alcoholic Beverages Manufacturer € 500,000 Funding: € 6million Turnover: The Solution – Disclosed Export The Company Established in 1998, this company is Invoice Finance with international involved in the development and currency accounts and multi-lingual manufacture of alcoholic beverages. services. • Provides on-going access to funds The Challenge as soon as the products leave the • Extensive growth plans with manufacturing plant in Amsterdam. • investment in brand development Client upgraded facility with bad and promotion putting a strain on debt protection for one of their cash flow larger debtors who are based in • Working capital tied up in extended Korea, we were able to obtain a limit of € 400k against this debtor credit terms of up to 100 days to overseas debtors which gives our client further • Over 90% export sales to countries confidence when trading such as Australia, Korea and US
Case Study Business Type: Cloth Manufacturing € 600,000 Funding: € 1.7million Turnover: • Exporting to Mainland Europe, largest customer in Italy. • Opportunity to double trade levels with largest customer. • Current cash flow and banking facilities will not fund this potential growth – approx. 75% year on year. • Existing debtors ledger of € 450k – funding limit of € 600k with prepayment rate of 75%. • Turnover to grow from € 1.7m to € 3m with aid of facility. • Net profit margin to grow from 4.4% to 6.4%.
Cash flow without Invoice Finance Facility Cashflow Without Facility (including potential growth): Month 1 2 3 4 5 6 7 8 9 10 11 12 Turnover 150 150 150 170 200 220 250 250 250 250 250 250 Receipts 150 150 150 150 150 150 170 200 220 250 250 250 Inflow 150 150 150 150 150 150 170 200 220 250 250 250 Outflow 145 145 145 460 210 230 240 240 230 230 225 220 Monthly 5 5 5 -310 -60 -80 -70 -40 -10 20 25 30 Cumm 15 20 25 -258 -345 -425 -495 -535 -525 -505 -480 -450
Cash flow with Invoice Finance Facility Cashflow With Facility: Month 1 2 3 4 5 6 7 8 9 10 11 12 Turnover 150 150 150 170 200 220 250 250 250 250 250 250 Receipts 150 150 150 150 150 150 170 200 220 250 250 250 Inflow 150 150 150 502 187 202 230 237 242 250 250 250 Outflow 145 145 145 460 210 230 240 240 230 230 225 220 Monthly 5 5 5 5 -23 -18 -10 -3 12 20 25 30 Cumm 15 20 25 67 43 25 15 12 24 44 69 99
Cash flow without Invoice Finance Facility Cashflow Without Facility (with standard growth of 10%): Month 1 2 3 4 5 6 7 8 9 10 11 12 Turnover 150 150 150 160 160 160 160 160 160 170 170 170 Receipts 150 150 150 150 150 150 160 160 160 160 160 160 Inflow 150 150 150 150 150 150 160 160 160 160 160 160 Outflow 145 145 145 145 145 145 150 150 150 150 150 150 Monthly 5 5 5 5 5 5 5 10 10 10 10 10 Cumm 15 20 25 30 35 40 45 55 65 75 85 95
Profit & Loss Statements Profit & Loss Statement Notes: 1. No change in Gross Margin (40%) With Facility: Year 2014 2015 Sales 1,700 3,000 Gross Profit 680 1,200 € 75 € 192k Net Profit Without Facility: Year 2014 2015 Sales 1,700 1,900 Gross Profit 680 760 € 75k € 85k Net Profit
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