How easy is it to end an invoice finance facility?
The very nature of invoice finance (advances against unpaid invoices), to terminate or extract oneself out of this formal arrangement basically requires the repayment of cash. The rules of termination will be covered in the legal agreement and often the formal offer. It would be very rare for there not to be a notice period, this will be to protect both parties.
The repayment of the advance can be by any means but in reality there tends to be 3 methods commonly used:
- The repayment by another invoice finance company
- A move back to overdraft/loan or with bank
- Injection of capital
The route would depend on the circumstances which have led to termination. In reality the facility becomes integral to the business. Repayment eventually comes from improved cash management and retained profits. The danger is to create borrowing by using funds outside the working capital cycle e.g. by purchasing fixed assets or making long term investments.
