Arrangement fees for factoring have crept into the industry in recent years. If you look back at historical comparisons between invoice factoring and overdrafts they would typically say that arrangement fees were payable on an overdraft facility and not on an invoice factoring facility. However, this is no longer the case. Some lenders charge an arrangement fee, a legal documentation fee and a ‘take-on’ fee. The take on fee is the service charge applied to the debts in existence when the facility commences. For example, if you have a debtor book of £500,000 and a service fee of 1% then the take on fee will be £5,000 on day one. Add to this the arrangement fee and legal documentation fee and the first day of your factoring facility is an expensive day at the office!!
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The best factoring company for your business will depend on the unique characteristics of your business and importantly on your own requirement.
The main aspect of any factoring companies proposition is the structure of their facility, service levels and pricing.
Structure of a facility
It is imperative that the facility is structured to meet the needs of your business but some lenders may not be able to structure a facility to meet your needs. Some lenders have a credit policy that will not allow them to finance any debtor that exceeds over 25% of your total ledger. If you have one large customer that accounts for a large proportion of your sales ledger or all of your sales ledger such a lender would prove to be restrictive. You will need a lender that does not have such stringent criteria when it comes to concentration limits. Another example can be exports. Some lenders will simply not finance export sales so if you have export sales or are looking at export sales than you need to consider a lender that can finance those sales. Smart Factoring Quotes understand the capabilities and requirements of each lender in the market.
Read Full ArticleIf you are looking to finance a recruitment business you are in luck as there are several options open to you especially if you are providing contractors or temps that complete time sheets. That said, if you are a permanent recruitment company there are also several options that are available to you.
If you are a recruitment company thatis paying wages weekly against signed time sheets there is a good chance your clients are only paying you monthly at best. Recruitment businesses or notoriously cash negative for this very reason and if you have a fast growing recruitment business this problem is only compounded.
So what finance solutions are available to you?
Read Full ArticleIf you are looking to improve your business cash flow their are a few things that you can do and we will talk through these separately. In essence you are looking to speed up the flow of cash into the business while slowing down or eliminating the flow of cash out of the business. Let’s take a look at the different areas that can assist:
Credit control – if you are offering credit terms to your customers then it is important to ensure that you are paid on time. You have provided a good service or product and you are entitled to be paid. You have even been generous enough to offer credit terms so it is not asking a lot to be paid on time. Slow payers can have a real impact on the cash flow of your business. In reality if you are dealing with large organisations that have payment runs, etc.. it can be hard to dictate payment terms but you should still stay on top of it. Efficient credit control improves cash flow and importantly reduces the risk of bad debts.
Read Full ArticleAs a small business factoring can be an ideal solution for your working capital requirements. Factoring does not require you to be well established or even profitable. To qualify for a factoring facility it is more important that your business has the right processes in place, is in a suitable sector and has good quality customers.
Processes
A small business needs to ensure that it’s invoicing procedure is suitable for invoice finance. This means you should create a good audit trail. Agood audit trail for a factoring facility will differ from business to business. For a wholesaler it will include a purchase order, a proof of delivery and an invoice raised in arrears of the delivery. A temporary recruitment company will have a signed agreement, signed time sheets and then invoices submitted on the back of those timesheets. The key is to prove that your product or service was requested, prove that is was delivered to the satisfaction of the customer and as already described that the invoice is then submitted in arrears of the service or product being provided.
Read Full ArticleFactoring fees can be a significant cost for any business and as such it is important to reduce factoring costs wherever possible. We have a few tips to help you:
Review your facility – it is important to reciew your facility on a regular basis both with your own factoring company and with the market. As your business grows or changes it may well mean that your business qualifies for better rates. Typically the higher your turnover the lower the percentage service fee you will pay. Often businesses that experience rapid growth fail to review their facility and as such are paying a lot more than they need to. I recently spoke with a business whose turnover had tripled since they set up their facility. As a result we more than halved their total fees. Importantly the market also changes and as such better or more suitable products become available that may be more cost effective. If you want a full review of the market to see what savings you can make please contact the team at Smart Factoring Quotes today.
Read Full ArticleInvoice discounting has often been reserved for larger, well established businesses and smaller businesses have been forced to accept invoice factoring.
The good news is that invoice discounting can be accessed by smaller businesses.
Read Full ArticleIf you have a business that offers credit terms you can spend a lot of time worrying when you are going to get paid. Cash flow is probably the major challenge for any business and this is why more and more businesses in the UK are starting to use invoice factoring.
Invoice factoring offers businesses the opportunity to access up to 90% of the value tied up in unpaid invoices. This means that by using invoice factoring a business can smooth cash flow and access cash to pay salaries and suppliers when needed. Not only does this eliminate stress it also allows a business to grow and prosper. Invoice factoring also offers the opportunity to outsource your credit control function to a professional business that will chase your outstanding invoices with a system of letters, month end statements and phone calls where necessary.
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