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Case Studies

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.

Single Debtor Factoring

Single Debtor Factoring can be hard to obtain – especially with any meaningful prepayment level.

There are only a number of invoice finance lenders who will consider a proposal where a client has only one customer. This number reduces dramatically as the required finance limit increases.

There is an argument that lenders should be willing to provide funding against a good quality single debtor such as Tesco and as stated some lenders are more than happy to do so. It does however increase the risk profile and typically they will need the debt credit insured. A major concern relates to disputes – the debtors willingness to pay rather than their ability to pay.

Lenders will often call this type of proposal 100% concentration

Smart factoring Quotes recently received an inquiry from a client looking for finance of £800,000 against a single debtor.

We were able to do a quick review of the market and establish which lenders were able to help. We received a lot of interest in the proposal but most lenders were unable to assist over a level of £500,000.

The proposal was very urgent for a number of reasons and we were able to agree terms with a lender quite quickly which were acceptable to the prospect. We were able to collate the required information quickly and get the facility set up in the timescales required by the prospect.

If you are looking for a invoice finance facility and you only have one customer please get in touch  with Smart Factoring Quotes today.

Permanent Recruitment Factoring has often been challenging to source relative to sourcing a factoring facility for temporary recruitment.

While temporary recruitment has an excellent audit trail by way of an agreed payment schedule, a purchase order and signed timesheets permanent recruitment is dogged by onerous terms and conditions which can reneder an invoice worthless if the candidate leaves withing a given period. As such the perceived security of any lender is reduced dramatically.

Permanent recruitment was for many years considered worthy of a 50% prepayment at best and this is still the case with many lenders. In fact some lenders will not look at a recruitment company where the permanent recruitment accounts for 30% of turnover.

I am glad to say that this is not the case with all lenders.

Several permanent recruitment businesses have approached us recently looking for new facilities or looking to improve on existing invoice factoring facilities.

Smart Factoring Quotes have managed to achieve a 70% prepayment level on both invoice factoring facilities and invoice discounting facilities.

There are clearly some invoice factoring companies out there who have taken the time to analyse the risk of a candidate leaving their new job. I guess it can happen but will every client leave? Highly unlikely and as such a 70% prepayment seems acceptable – to lender and client alike.

Construction Factoring is challenging for invoice factoring companies for a number of reasons.

Any invoice factoring company wants to know that the value of any invoice that they have funded against is secure. In the event of business failure they want to be able to approach the clients customer and request that the invoices they have taken good title to are paid in order to recover their position.

With this in mind if you consider how the construction industry operates you will see how this can cause issues for invoice finance companies.

In the first instance most contractors within the construction industry raise ‘applications for payment’ rather than invoices. As such invoice factoring companies cannot take good title to the applications in the traditional manner.

The work done is usually measured weekly, monthly or against specific milestones and as such applications or invoices are raised for a part completed project. Should the contractor fail to complete the project then liquidated damages can come into effect which render the outstanding invoices worthless. As such any invoice factoring company would not recover their position against these invoices.

Retentions at the end of the contract can also cause issues for invoice finance companies but these effect the prepayment level rather than the ability to provide funding.

Bad news for the construction contractor looking for a flexible working capital facility? Well, it is not all bad news. Smart Factoring Quotes have lenders who can provide invoice finance facilities to construction contractors. Get in touch today.