Tandem Invoice Finance: A Helping Hand for Growth

Tandem invoice finance, also known as spot factoring or selective invoice finance, offers businesses a flexible approach to managing their cash flow. Unlike traditional invoice factoring where you commit to financing all your invoices, tandem finance allows you to choose which invoices you want to finance, giving you greater control and adaptability.

How it Works

The process is typically straightforward: First, you select the invoices you want to finance through the tandem finance provider. These are usually invoices for goods or services already delivered to your customers with payment terms of 30, 60, or even 90 days. Next, the provider assesses the creditworthiness of your customers (the debtors) to ensure they’re likely to pay. Once approved, you receive an advance – usually a significant percentage (e.g., 70-90%) of the invoice value – almost immediately. This injection of cash helps bridge the gap between invoicing and receiving payment, improving your working capital.

The tandem finance provider will then collect payment directly from your customer when the invoice becomes due. Once they receive payment, they remit the remaining balance to you, minus their fees. These fees usually consist of a service fee (a percentage of the invoice value) and interest charges for the period the advance was outstanding.

Benefits of Tandem Invoice Finance

Improved Cash Flow: The most significant advantage is immediate access to working capital. This allows you to meet immediate obligations, invest in growth opportunities, and avoid late payment penalties.

Flexibility: The selective nature of tandem finance is a major draw. You only finance invoices when you need to, avoiding unnecessary fees and maintaining control over your customer relationships.

Reduced Credit Risk: The provider assesses the creditworthiness of your customers, potentially identifying and mitigating risky transactions.

Simplicity: The application and funding process are generally quick and streamlined, especially compared to traditional bank loans.

Scalability: As your business grows, you can easily scale your financing needs up or down with tandem finance, depending on your fluctuating cash flow requirements.

Is Tandem Finance Right for You?

Tandem invoice finance is particularly well-suited for: businesses experiencing rapid growth, seasonal businesses with fluctuating income, companies with long payment terms, and businesses seeking to avoid the long-term commitment of traditional factoring.

However, consider the costs involved and carefully evaluate the terms and conditions offered by the provider. Ensure the fees are reasonable and transparent, and that the process aligns with your business needs and values. Ultimately, tandem invoice finance can be a valuable tool for managing your cash flow and fueling growth, but it’s crucial to understand the details before committing.