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Stories Tagged ‘Invoice Factoring’

Invoice Factoring Companies within the UK range between the arms of the high street banks such as HSBC through to small family owned outfits such as Factor 21.  Most of them offer the same basic services which are factoring and invoice discounting and some offer specialised services such as confidential factoring and trade cycle finance. However, it is important to remember that the same product from different lenders can be a very different proposition. It can differ on many levels such as price, actual prepayment level, the way you operate the facility and notify the invoices, the way the service is delivered by the lender, etc..

There are roughly 45 invoice finance companies in the UK so there is a good choice.  Typically depending on the unique needs off your business there will be a lender that is best suited to your needs. The problem is in identifying that lender. Unfortunately the factoring companies are sales focused and as such all will try to convince you that their offer is best for your business.

If you want some impartial and independent advice contact Smart Factoring Quotes.

Invoice Finance is the generic terms that describes both the industry and the product that provide finance against invoices that a business raises to other businesses.

Under the umbrella of invoice finance there are various products including:

Invoice Discounting – this is where a finance company will provide finance against the invoices raised by a business but the responsibility of collecting the debts in remains with the business itself. This type of facility can be either disclosed or confidential.

Factoring – this is where an invoice finance company purchases the debt from a business and not only provides finance but also provides the credit control function – i.e. they chase the debts. Disclosed factoring is by far the most common form of finance however confidential factoring can be sourced.

CHOCS – this stands for ‘clients handles own collections’ and operates in the same way as a factoring facility. However, the  factoring company allows the client to do their own credit control.

Beyond this there can be recourse and non-recourse facilities for all these types of facilities.

When choosing your facility it is important to consider what you require from the facility and then it is worth speaking with an invoice finance broker to see what facilities will best meet your needs. It is important to remember that each lender has it’s own criteria and capabilities.

I was recently helping a business in Leicester source a suitable invoice finance facility after their bank owned invoice finance company had decided they no longer wanted to support.

The proposal was a challenging one for a number of reasons but I love a challenge and was confident that I could assist. I was let down by one lender who despite understanding the challenges on day 1 took the lead forward for 2 months and then declined it based on the same challenges I had advised them about on day 1. This didn’t help!

Anyway, another broker had got involved and introduced another lender who aims to do the deals that other lenders will not do. Their position in the market is a good one and they are a valuable source of finance to companies that perhaps would not be funded to other lenders. However, they do charge accordingly and in this instance I did feel that a more traditional type of lender was appropriate.

I managed to secure an offer of invoice factoring from an independent invoice finance provider that was some £3,000 a month cheaper than the offer he already had from the other broker. The client was delighted and signed all the paperwork to proceed.

However, he had signed all the paperwork with the other lender having been advised it wasn’t legally binding until he owed them any money. This was the brokers advice rather than the advice of the invoice finance company concerned. Part of the documentation was a debenture that was promptly registered at companies house.

When it came down to transfer this debenture was a bit of a spanner in the works, although it shouldn’t have been! The lender that had registered insisted on £3,000 for the release of the debenture which the client promptly paid. In my opinion this debenture could have been cancelled by submitting a form to companies house.

There is an argument that my client led the other lender a merry dance and incurred them a lot of work and as such the fee was justified.

The moral of the story is be careful what you are signing with invoice factoring companies and be careful who you take advice from. The brokers advice in this instance was at best questionable.

We have several invoice factoring clients who operate in the scaffolding industry. They have always found it difficult to find invoice factoring companies who want to lend to them because of the industry that they operate in. However, as an industry scaffolders require cash flow finance because the house builders are slow to pay yet wages need paying weekly. On top of that funding for tubing is hard to come by and often has to be hired in at high rates or bought for cash which only compound the problem.

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Export Factoring is an excellent way of funding cashflow relating to international trade on open terms. It allows a business to smooth it’s cashflow, collect debts efficiently and through the inclusion of debtor protection can reduce risk.

Most invoice factoring companies will want a credit insurance policy in place to ensure that the companies you are selling to are credit worthy.

However, not all invoice factoring companies will provide funding against exports and as such by choosing the wrong lender your funding can be severely restricted. If you have exports or are looking to grow your business in the international market it is important to choose the right invoice factoring company.

Some lenders claim to provide funding against exports via Factors Chain International (FCI) but while it is an excellent idea it remains cumbersome. Rather than taking the risk themselves they use a local factoring company to take the risk. If for example you have a debtor in Australia, they will use another FCI affiliated factoring company in Australia to provide the limit, take the risk and collect in the debt. This sounds like a good idea and I believe it is a good idea. The problem is that it is very slow when you are looking for a credit limit and can be cumbersome throughout.

In my opinion you want a UK based lender who will provide the funding and accept the risk themselves. If they require the sales to be credit insured then so be it.

By choosing either an invoiuce factoring or invoice discounting facility you can decide whether or not you require a credit control function. Some lenders will offer a service in variety of languages which can be very effective when collecting debts in countries that speak other languages.

If you require export factoring it is worth contacting Smart factoring Quotes to establish which lender will be best suited to your requirements.

Factoring in Northern Ireland is an important form of finance for the area. However, which invoice factoring companies can assist in Northern Ireland?

We are fortunate to have an excellent client base in Northern Ireland and through recommendation have managed to support clients with good advice as to which lenders can best meet their needs.

I personally believe more invoice finance companies should show a willingness to do business here. There is an excellent market of businesses, the legal system is obviously the same as in England and the region is easily accessible by cheap flights from the UK. The geography certainly shouldn’t be used as a barrier to do business.

If you have a business in Northern Ireland and you are looking for an invoice finance facility get in touch with Smart Factoring Quotes today.

We have often been approached by businesses that work in the IT sector who raise invoices in advance for maintenance contracts or in stages for large projects.

Unfortunately lenders have always been wary of funding such businesses as it was felt that invoices would not be paid by customers in the event of business failure.

We are happy to announce that we have access to a new product targeting the IT sector.

Whatever your function within the IT sector, if you are looking for finance get in touch with Smart Factoring today.

I recently met Philip Padgham on a corporate day with a firm of accountants. Various people were singing his praises and a contact of mine asked if I would try using his invoice finance company Partnership Finance.

I had a chat with Phil who explained that as a finance company they were fast moving and decisive. They also claim to offer an excellent level of service. Yes, I had heard it all before but as it happened I had a client who had been let down at the last minute by Absolute Finance. (Strangly Absolute Finance had taken 2 months to decline a deal based on information they had been aware of on day 1.)

Anyway, I presented the opportunity to Phil and he visited them the very next day which was a friday. They then surveyed the deal on the Monday and approved the deal by credit committee on the Wednesday. The client is delighted. I am impressed. From first visit, through to survey and then on to formal approval by credit committee in 4 working days is fantastic.

A big ‘thumbs up’ for Phil Padgham and his colleagues at Partnership Finance.