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Case Studies

We were recently approached by a haulage business based in Glasgow who wanted to review their facility. It was a very nice business and they advised that they had only ever reviewed their facility with the Scottish banks. Given the recent well publicised problems they wanted to look at other alternatives. It should also be stated that they are a Scottish registered company.

While we knew the companies that could provide factoring Glasgow to a Scottish registered company we decided to go back to the market to see if anyone new had this capability. We were delighted to see that a few new lenders now had the capability to help businesses based in Scotland and were very keen to do so.

In short we were able to source a very competitive facility for our client.

If you are a business based in Glasgow or anywhere else in Scotland it really is worth exploring what opportunities are available to you.

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.

We often receive inquiries from clients who are keen to transfer from one lender to another because the credit control is poor.

I am afraid to say that often the provider accused of providing a poor service is a bank owned factoring company. However, when we ask how the factoring company was chosen there is also a common theme. They were either chosen because that is who the business banks with so it was a default choice or because they were the cheapest.

Without going to the market it is almost impossible to understand what your options are. If you don’t understand what your options are then how can you make an informed decision?

If you have chosen the very cheapest option then are you really surprised that the service does not quite meet your expectations? Would you expect free champagne on an Easyjet flight or free home installation from Ikea. No, of course you wouldn’t.

Typically with credit control from a factoring company you will get what you pay for. The larger bank owned factors will typically fully automate their credit control and it will be done by automated letters and month end statements. They may call your largest debtors but it will be a hands off approach.

Other factoring companies will provide a hands on credit control service where they call each debtor and have open communication with you the client. This however is time consuming and as such the cost for such a service is more expensive.

When choosing a factoring facility it is important to understand what level of service you expect and choose a lender accordingly.

Smart factoring quotes are proud to announce the launch of a factoring blog on their new updated website.

The factoring blog is aimed at business owners who have a factoring facility or are looking for a factoring facility. It will provide relevant industry updates as well as discussing topical issues that business owners encounter both with factoring facilities and also with the economy at large.

We will be welcoming any comments but don’t want to become a message board for rumours or scaremongering.

Active Sports Bras are due to launch their specialised online store selling top branded sports bras in January 2012.

Funding Solutions UK Ltd have been working hard with Active Sports Bras to ensure the necessary funding is in place to launch a top quality e-commerce site and to purchase the required stock.

Active Sports Bras are aiming to do the following:

  • provide top quality sports bras at discounted prices by maintaining very low overheads and passing on those savings to customers
  • encourage women to return to sport through the use of incentives and social media

It looks like a great opportunity to support women in sport and the ability to pass on substantial saving should ensure a loyal following.

Cash flow problems within your business can be solved by looking at several solutions.

Some of those solutions for cash flow problems are financial solutions and involve borrowing money or restructuring existing facilities. The others are operational changes in terms of how you operate your business. Let’s look at each of them briefly:

Working capital facilities

You could look at an overdraft, invoice discounting or factoring facility. If one of these is already in place you could look to restructure to ensure the maximum amount of cash is generated for the minimum cost.

Asset Refinance

If you have any assets within the business you can look at refinancing these assets. This will mean an injection of cash however it can prove costly in terms of interest costs and you should consider the cash flow implications of the monthly repayments. If you already have asset finance facilities in place it may be worth refinancing to reduce the monthly repayments.

Remortgage

If you have a mortgage or an unencumbered property you could look to refinance this to raise money or reduce the monthly repayments.

Collect in money owed

If you have a debtor book it is important to ensure that debts are collected in on a timely basis. Your credit control skills could vastly improve your cashflow. Can you offer a settlement discount to get paid quicker?

Supplier Terms

Can you negotiate better terms from your existing suppliers or can you approach alternative suppliers with a view to obtaining extended terms?

Cost Cutting

Can you cut costs within the business by cutting out unnecessary services, insurances, staff members? You may need to make some tough decisions but you have to protect your business.

Selective factoring was recently set up by Smart Factoring Quotes for a security company based just outside Chester in the North West of England. They had landed a large contract worth over £400,000 over 3 months. They had to invoice monthly on 90 day terms and yet they were paying their security staff weekly.

They approached with a view to spot factoring the 3 individual invoices. We looked at their options and found that selective factoring was by far and away a cheaper option. Selective factoring means that you factor all the invoices of a particular debtor whereas spot factoring means you can pick and choose individual invoices. The difference in this instance is subtle but the difference in cost was dramatic.

Selective factoring worked out almost 10 times cheaper in this instance. The facility will allow our client to take on a lucrative contract and meet it’s weekly wage demands. Profits will be increased because of the selective factoring facility.

If you are looking at an invoice finance facility in Edinburgh your first port of call should be Smart Factoring Quotes. Smart factoring Quotes specialise in arranging factoring and invoice discounting facilities and we understand which lenders are best placed to help businesses in Edinburgh.

Our approach is as follows:

  • we explain in full what your options are
  • We explain all hidden costs and other things that you should be aware of
  • our aim to allow you to make an informed decision
  • we aim to structure facilities to maximise cash generation and minimise costs

If you are a business based in or close to Edinburgh please give us a call. Our aim is to save you valuable time and money by taking the stress and uncertainty out of arranging an invoice finance facility.

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