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Stories Tagged ‘Invoice Factoring Companies’

If you take out an invoice finance facility and the prepayment is 80% you may well think that you will receive 80% of the total ledger. In theory that should be the case if the facility is set up properly. The key is to understand what your eligible debt is. Let’s look at areas that could reduce your eligible debt:

Concentration Limits – I have already touched on this in a previous post about concentration limits so will not go into too much detail. However, any debt that falls outside the concentration limit will not be eligible for funding and as such can reduce the eligible debt dramatically.

Recourse Period – If you have a recourse period of 90 days any debt that is over 90 days old will not be eligible for funding. If you have a £100,000 ledger but £20,000 is over 90 days old then the eligible ledger is only £80,000. This is what the prepayment level will be applied to.

Debtor limits – If you have 10 debtors of £10,000 you will have a ledger of £100,000. If you had an individual limit of £5,000 for each of those debtors the total eligible debt would only be £50,000 and with an 80% prepayment applied this would generate funding of £40,000. By trading over agreed credit limits you will in effect reduce the actual prepayment level.

It is imperative you set up a factoring facility that can accommodate the unique features of your own ledger. Ensure that the debtor limits and concentration limits are what your require. Shop around! Also ensure that you understand the recourse period and the effects it has on your funding and costs. Work hard to ensure debts are collected within the recourse period.

A concentration limit indicates how much debt an invoice finance funder will allow with a single debtor. By way of an example if your concentration limit is 30% and your total ledger is £100,000 then the lender will only consider £30,000 of funding with any single debtor. Supposing you had £50,000 of debt with your largest debtor then only £30,000 would be considered as eligible debt. This would reduce the total eligible debt to £80,000 so if your prepayment was 85% the funding generated would be £68,000.

It is important to understand the impact of a concentration limit on your funding. In the example above although you as a business have an 85% prepayment level the impact of the concentration limit has reduced the actual prepayment level to just 68%.

Concentration limits will not be an issue for many businesses who have a good spread of customers. However, if you feel that one customer could account for 20% of the money owed to you at any one time it is important to consider the concentration limit. Some lenders impose a rigid 20% concentration limit while others will offer a concentration limit as high as 100% meaning they will finance a single debtor. Be honest with yourself and try to envisage what may happen in the future.

North East Factoring

As a business owner in the North East factoring could provide your business with the cash flow solution it needs to grow and prosper. It is no secret that businesses are taking longer and longer to pay their invoices and as such many business owners have cash tied up in their debtor book. Factoring could be the answer to your cash flow problems but it is important to understand all costs and risks.

Smart Factoring Quotes has an office based in Ryton, Newcastle and works with local businesses to explain not only the benefits of invoice finance but also the costs and risks involved. You can contact us for impartial advice. We are happy to answer any questions and we are totally independent to you can rest assured our advice is impartial.

We don’t believe in the hard sell approach and our aim is to provide you with all the information you need to make an informed decision. This means a balanced approach in explaining the downside of factoring such as the costs and the risks you take in providing security such as personal guarantees and indemnities. Until you fully understand the benefits and the associated costs and risks of any finance facility how can you make a decision?


FS Audit Services have an updated website.

FS Audit services conduct periodic invoice finance audits and pre lend surveys on behalf of invoice finance companies.

Reports are produced using each lenders own template. FS Audit services believe that this will avoid any confusion internally and will enhance understanding through familiarity.

Invoice finance companies place huge importance on a businesses audit trail.  The audit trail ensures that the debts are secure and provable.

If you are looking for an invoice finance facility it is important to look at your business and how robust the audit trail is.

Each business will have it’s own quirks and characteristics. As such you will have to focus on finding ways to implement a suitable audit trail.

By way of examples let’s have a look at some traditional robust audit trails that invoice factoring companies expect to see in place.


  • Purchase order
  • Proof of delivery (signed by recipient)
  • Invoice

Temporary Recruitment

  • Agreed rates
  • Purchase order
  • Signed timesheet
  • Invoice

Design Agency

  • Brief supplied by customer
  • Quote
  • Acceptance
  • Work is submitted
  • Signed satisfaction note (this eliminates queries down the line)
  • Invoice raised

The better your invoice audit trail the better. Importantly you need some kind of 3rd party sign off by way of a signed proof of delivery, signed timesheet, signed satisfaction note.

This may seem like additional administration but it is key to sourcing a facility and it is a good step for your own internal procedures.

Lloyds TSB Commercial Finance have always been aggressive in terms of pricing and also credit appetite when compared to the other bank owned invoice finance providers.

However, recently I have seen their factoring pricing creep up dramatically. In particular the discounting fee. Yesterday I saw a quote where the fee was 4.5% over bank base rate subject to a minimum of 6%. This is 5.5% above the current bank base rate.

Even when compared to the independent providers, many of whom have a higher cost of funds than Lloyds TSB Commercial Finance, this seems expensive to me.

This is fairly disappointing and feels as though the bailed out banking group is taking advantage of SME’s.

I understand they can offer between 3% and 6% so if you are looking for competitive rates be sure to negotiate with Lloyds. Alternatively approach Smart Factoring Quotes and we will source the best rates in the market for you.

How long does it take to put in place an invoice finance, invoice factoring or invoice discounting facility?

Well the flippant answer is ‘how long is a piece of string?’ However, that helps nobody. On average I would say it takes 3 weeks but I have seen it done in 2 days. While the broker and factoring company plays a very big part in the process it does rely heavily on the requirement and the information that the prospect can provide.

I remember looking at an ‘urgent requirement’ last May and advising we could have a facility in place for the ‘following friday’. While we had everything in place the prospect simply let everyone down by not being able to supply simple information – such as a copy of his passport. This rumbled on until October!!

The flip side of this is a prospect that phoned me on a Saturday evening advising he needed a £1.7m facility in place by the Wednesday. I advised him everything I would need and I had it on Sunday morning. The facility was in place to meet his deadline.

The other key things to achieving a quick turnaround is a) knowing which invoice finance company can meet your needs and b) knowing which person within that company to speak to.

Invoice Factoring Services are provided by numerous invoice factoring companies within the UK.  Depending on the unique requirements of your business there will be a factoring company that is best suited to meet your needs. If you would like guidance as to which factoring company can provide the factoring service the best meets your needs please contact Smart Factoring Quotes today.

Invoice factoring services can differ dramatically for each invoice factoring company. They differ in terms of the following:

  • The individual limits they will set for each of your customers. This can have a huge impact on the amount of funding generated.
  • The funding period they are happy to fund up to. Some will fund up to 120 days while some others will only finance for much shorter periods. This may or may not be an issue but it is important to realise what is on offer and how it impacts on the factoring service you receive.
  • The style of collections. Factoring companies provide a collections/credit control service. Some genuinely manage the credit control with phone calls and communicate any issues with you so they can easily be resolved. Others will simply send out automated letters and month end statements in the hope that customers will react. Some companies will even provide a confidential credit control service where they call as if they are calling from your own business rather than a factoring company.
  • Concentration limit – how much debt will the factoring company provide against any one debtor. This may impact on your funding.
  • Then there are the obvious headline rates including prepayment, service fee and discounting fee. These are obviously important but please, please, please look beyond these and understand the total fees and what funding is actually generated.

If you are unsure please take impartial advice. Call Smart Factoring Quotes – we are happy to help.