HSBC is a household name. As one of the world’s largest banking and financial service providers, they serve more than 39 million customers all over the world, from wealth management to high street banking. Their global presence, stretching from the United States through Latin America to the Far East, makes them an attractive partner for businesses with global ambition.
It is this worldly mindset that makes HSBC invoice financing stand out. They have been offering this service for more than five decades, and now, their offer is looking increasingly interesting. With an emphasis on funding export debt and a fully integrated system with the rest of the bank, HSBC’s service is great for customers looking to free up working capital and expand their global reach. We look at their services in more detail here.
Overview of HSBC invoice finance
Quick update on what invoicing financing is
Pending invoices (known as debtors) represent capital that will be paid to you in the future, but while you wait for the payment term to elapse, you may need this as working capital.
Invoice financing is a product provided either on the basis of invoice discounting or invoice factoring. In either case, the provider buys a company’s debts (with some exclusions) and subject to terms and conditions, make funds available that represents a percentage value of said debt (usually 80-95%). The remaining balance, less the bank’s charges, is available after the customer clears the invoice.
These funds improve your cash flow as there is a shorter delay between when the invoice is raised and when you receive the payment. Fees and charges apply, but it frees up money for you to invest in the company.
Firms HSBC invoice finance may be right for
Companies of varying sizes and industry sectors, that sell on credit terms to other businesses can typically access invoice financing. Usually, businesses that experience one or more of the following scenarios find invoice financing helpful:
- If sales are increasing and cash flow is not keeping pace.
- You are moving into trade credit sales for the first time and you want to manage your workload.
- If you have money tied up in the sales ledger that you could be investing in the business.
HSBC Receivables Finance
HSBC’s invoice finance offering is marketed as Receivables Finance. With HSBC, customers have lending solutions against 90% of the pending invoice value. The funding can be received within 24 hours after the invoice is raised. This service is available to any businesses that meet their requirements, even those that are not banking with them already.
HSBC invoice financing is available to companies that have a projected turnover of at least £500K for their Invoice Finance with Sales Ledger Management product and at least £750K for Invoice Discounting. Your business also needs to prove it is profitable and demonstrate a positive balance sheet.
HSBC’s Receivables Finance helps businesses to increase their cash flow and can protect you from bad credit. These products help you manage your business finances and grow by freeing up working capital that you can reinvest in your business.
The two types of Receivables Finance
Invoice Finance with Sales Ledger Management - factoring
HSBC Invoice Finance with Sales Ledger Management is essentially an invoice factoring service. With this programme, HSBC manages your outstanding invoices and credit notes. They use this information to adjust the funding available to you. This funding will take into account the relevant charges and fees under their agreement. HSBC offers an electronic platform to ensure this process is seamless and efficient.
HSBC Invoice Finance with Sales Ledger Management is a disclosed service. This means that your customers are aware of HSBC’s involvement and HSBC will help you chase your debts as part of their complete service. It is important to note that customers should not pay you directly and instead, deal with HSBC representatives.
By freeing up funds, you can gain new clients as you are able to react to opportunities faster. Meanwhile, your accounts are in order: you know where your working capital is coming from, preventing you from dipping into personal finances or business assets to seize such opportunities. It can also help you broker more favourable terms with your suppliers as you can pay early. Obviously, it also reduces risk; with fewer debtors, you are in a stronger position.
An intriguing feature that is specific to HSBC is their appetite for funding export debt. They offer export invoice finance for use with international customers, to help you free up cash from their invoices. Their global positioning also means HSBC’s team can communicate with your customers’ staff in a variety of languages, simplifying and expanding your global business opportunities.