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Factoring Rates can differ dramatically from lender to lender. We will have a look at what variables impact on the pricing of a factoring facility and then we will look at why some factoring companies are more expensive than others.

What impacts on the service fee?

The service fee is what the lender charges for administering your facility and it is typically determined by workload. This is dictated by the number of debtors you have an also the number of invoices you issue. Turnover also has a huge impact on your service fee and typically the higher your turnover the lower the percentage service fee.

The discounting fee, what impacts on this?

This is the cost of borrowing and it should reflect the risk the company is taking. The total fee is made up of the base rate and the margin. Some lenders use the Bank of England base rate while others use LIBOR. Watch out also for the minimum  base rates which a lot of lenders put in place. The margin is often dictated by their credit policies and with negotiation can often be reduced.

These are the 2 main fees but it is important to be aware of additional fees and charges. Always consider total costs when looking at different offers. Please also consider what service is actually on offer and ensure it meets the needs of your business. Factoring rates are obviously important but so are service levels and facility structure.

I am quite often approached by clients who insist on using confidential facilities. The reasons for this can be varied and I always try to accomodate their requirement.

Traditionally confidential invoice finance has been hard to obtain as the only product available was confidential invoice discounting. The criteria for this were quite rigid and it was reserved for large, profitable business with a good finance and administration function.

The good news is that confidential facilities are now more readily available than ever. This makes the life of an invoice finance broker much easier as it means we have a wider range of products to offer clients based on their unique requirements.

Confidential facilities now include confidential factoring, confidential CHOCS there is a new confidential product due to be launched in January 2012 which we are quite excited about.

Fixed fee factoring is ideal for businesses looking for a single flat monthly fee when factoring.

Research has shown that small businesses find factoring charges confusing and unpredictable. Fixed fee factoring takes away this confusion by combining all the charges into an easy to understand single monthly factoring fee. It is easy to budget for and provides a valuable boost for the cash flow of a small business.

It is ideal for a business with a fairly smooth cash flow. However, if your turnover is more variable you could find yourself paying the flat monthly fee in a month where you have not had any turnover in which case you would be paying for nothing.

An alternative to fixed fee factoring could be a bundled fee deal. This is a single fee but is charged as a percentage of each invoice with no minimum fees. It is arguably as easy to understand as a fixed fee deal but is more flexible.

If you are looking for a indicative quote for invoice factoring you can simply go online and visit Smart Factoring Quotes. The site not only offers bespoke indicative quotes for invoice factoring and invoice discounting, it’s aim is to be an online resource for business owners. The site offers business owners who currently use invoice factoring advice on how to minimise costs and also on what other facilities may be available to them.

For a business that is new to invoice finance it offers advice on negotiating a new facility, case studies, details of the different types of facilities and it also offers a phone number where they can speak to a member of the team. The team have decades of experience within the industry but importantly also have experience of running SME’s in the ‘real world’. As such the Smart Factoring team can have encountered most scenarios before.

The option of online ‘self help’ allows business owners to develop knowledge of the invoice finance market and it’s products with a view to helping them negotiate their own facilities. They can also check the offers they receive from lenders via the online quotation system. Alternatively they can pick up the phone and access the team directly.

Looking at the site there are an impressive list of testimonials from business owners and accountants which is comforting.

If you are looking for an invoice finance facility why not visit Smart factoring Quotes today.

Invoice Finance Broker or Accountant?

When a business owner is looking for impartial advice about invoice factoring should they be asking their accountant or an invoice finance broker?

This relies heavily on the quality and integrity of the parties you are speaking with. In terms of this post I will be making generalisations and will also try to be impartial – I am an invoice finance broker afterall.

Accountants are in a position of trust with their clients. They are well educated and have a good general understanding of accounting procedures and business. Some are mere ‘bean counters’ whereas some are more integral to businesses and offer proactive business advice and planning. In comparison an invoice finance broker is a specialist in the invoice finance industry. All day every day they are looking at different scenarios and the objectives of different business owners with a view to meeting their needs. On that basis I think that a reputable invoice finance broker offers a more specialised and focused service. As such their analysis can be more in depth and their industry contacts should typically be wider than those of an accountant.

Impartiality is an important factor – excuse the pun! An invoice finance broker works for commission so there is a chance they will look to maximise their commission. That said the commissions paid by lenders are fairly standard across the industry. It is also unlikely an invoice finance broker would say ‘You don’t need factoring’. An accountant on the other hand should be totally impartial as they shouldn’t accept the commissions offered by lenders. That is not the case though. I know a multitude of lenders that pay commissions to accountants. Some of them take the commissions and offset them against thye clients fees which is admirable but that is not always the case. As an invoice finance broker I actually share commissions with some accountants so I know where their motivations lie. That said if they are offering advice and helping structure a facility then should they not be entitled to the same commission as an invoice finance broker? I personally have no issue with it but in terms of a comparison it is important to see in many instances the motivations are very similar.

Invoice finance has so many options in terms of providers, facilities and variables I personally feel that expert advice from a reputable broker is invaluable. But the comfort that your accountant gives you because of the trust within the relationship is also invaluable.

On that basis perhaps it is best to use an invoice finance broker to establish your options and importantly the pros and cons of each. Then use your accountant to check the findings and help you decide what is best for your business.