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Stories Tagged ‘Invoice Factoring Company’

Recently we were approached by a landscape gardener than needed assistance in raising some working capital. The family owned business has issues as they were working for the well known house builders. These clients would take a long time to pay and in the meantime they had to pay their workers weekly.

They had approached their own bank who were unable or unwilling to provide an overdraft facility. They referred them to their invoice finance arm who were unwilling to assist as the business was considered to be in the construction industry as they were required to submit applications for payment to the house builders like any other contractor. From there they had approached several independent invoice finance providers who were unwilling to help for the same reasons. The landscape gardener then approached us at Funding Solutions UK.

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If you are looking for a factoring company then it is imperative you choose the one best suited to your business and your factoring requirements.

Factoring companies all differ in terms of how they structure facilities, what restrictions they impose and of course how they price their facilities.

In a basic level each factoring company offers different prepayment levels and different pricing structures.

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Construction factoring is a topic that we have covered several times on this forum.

It is a sector that struggles to find suitable forms of working capital finance as banks are reluctant to offer overdraft facilities and invoice finance companies are uncomfortable with the risks associated with the construction industry.

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Recruitment finance can take various formats. Typically it depends on the type of recruitment and also the size of the company. We will look at the three main options available:

Recruitment factoring: this is suitable for recruitment companies of all sizes and for both temporary recruitment companies and permanent recruitment companies. It provides an advance against invoices raised of up to 90% allowing temps wages to be paid. It is also suitable for permanent recruitment companies but prepayments are typically around 70% for perms. Recruitment factoring is available to new start businesses aswell as larger well established companies. It includes a credit control service and can also include credit protection to reduce the risk of bad debts.

Recruitment invoice Discounting: suitable for companies that are better established and have a good credit control function within the business. This type of recruitment finance does not include a credit control service. It can be confidential or disclosed and can include credit protection to reduce the risk of bad debts. Again it can be used for either temporary recruitment or permanent recruitment.

Recruitment back office solutions: well suited to recruitment companies that want to outsource the full back office function. This service can provide finance in the same way as factoring but 100% prepayment levels can be achieved. It also includes payroll and admin services as well as optional credit protection and credit control.

If you have a requirement for recruitment finance it is worth contacting Smart Factoring Quotes to discuss your options in detail.

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.

There seem to be several invoice finance brokerages appearing that are linked to insolvency practitioners. Only today I was asked by a client of mine why this was so I thought a post may be due on the topic.

In short the insolvency practitioners see the invoice finance leads that give to lenders as a carrot to attract insolvency work from the lenders. In fact some of the IP owned brokers will only give leads to lenders if they give them insolvency work in return. I have seen some e-mail marketing from one such broker offering 2 new deals to a lender in return for a ‘fee generative appointment’.

Reciprocity is a buzz word in many industries these days and the invoice finance industry is no different.

However, in my opinion it does raise concerns for business owners who approach these brokerages looking for independent and impartial advice about factoring or invoice discounting. There is every chance that the business will simply be placed with the lender that they ‘owe’ a deal to. If this is the case it means that they are not really acting in the best interests of that client.

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.

Temporary Recruitment companies will often use some form of factoring or invoice discounting. It is almost a necessity in terms of how their cash flow works. Typically they are invoicing clients on 30 day terms and yet they are having to pay wages on a weekly basis.

A factoring agreement can provide up to 90% of the invoice value the day after the invoice is raised. This means that wages are covered and you don’t have to worry about waiting for clients to pay.

As an alternative to temporary recruitment factoring there are also full back office solutions that will take care of almost everything except finding clients and temp staff!!

If you are looking for a funding solution for your temporary recruitment company it is worth speaking to Smart factoring Quotes to fully understand what your options are. Smart Factoring quotes have helped to source facilities for temporary recruitment companies who are new starts all the way through to companies with turnovers in excess of £50m.

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