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15 Jul

What can impact on the prepayment level of an invoice finance facility? »

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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.

29 May

North East Factoring »

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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?

 

20 Apr

Does invoice finance increase profits? »

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Invoice finance can indeed increase profits. However, it is important to remember that it depends on what you do with the cash that the facility generates. It definitely increases your costs as you will have the invoice finance fees to pay so you will need to generate enough ‘new profit’ to cover these additional costs.

These new profits can be generated from new sales that took place because you were able to purchase more stock, fulfill more orders or perhaps pay more staff which will generate additional sales.

I have also dealt with clients who are able to take advantage of substantial settlement discounts. Any saving available that is more than the invoice finance costs leads to increased profitability.

In short yes invoice finance can lead to increased profits. However, that will depend on your own entrepreneurial abilities.

28 Mar

Factoring Costs »

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Factoring Costs can vary dramatically from lender to lender.  It is important to understand the total costs of factoring and when comparing quotes from different companies it is best to compare the total costs incurred in a year.

Headline rates can be misleading as certain companies will include all set up costs, audits, etc.. within the service fee whereas others will charge over and above the service fee for what they consider additional services. Headline factoring rates can therefore be misleading.

Smart Factoring Quotes offer some online advice on minimising factoring costs.

24 Jan

Best Invoice Discounting Rates »

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If you are looking for the best invoice discounting rates it is well worth speaking to Smart Factoring Quotes. We monitor the market for the cheapest invoice discounting rates available at any one time.

At present we have several invoice discounting companies who are actively competing on price and claiming they will not be beaten on price. It is however imperative that any business owner looks beyond the headline rates and considers total costs when comparing facilities from an invoice discounting company. It is also important to remember that the lenders offering the best rates can be among the most risk averse and as such your facility may be structured in a more cautious way.

At Smart Factoring Quotes our approach is to explain the benefits and potential downside of any facility and along side this show the total annual costs involved. This will allow any business owner to consider which facility represents the best value. To me that is the most important factor – compare the benefits the facility offers against the costs and then establish which facility represents the best value to your business.

If you want a helping hand give us a shout!!

28 Nov

Cheap Factoring »

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Cheap factoring is available from a variety of providers however everything is of course relative. When looking for an invoice finance facility it is important to remember that in some cases the most expensive provider can be 3 times more expensive than the cheapest provider.

It is also important to remember that good deals become available from lenders from time to time and as such the cheapest lender will depend on when you are looking. It is also important to remember that the cheapest factoring provider will also depend on the unique characteristics of your business and it’s factoring requirements.

Smart factoring quotes understand the market and monitor it’s changes. On that basis we can save you time doing research and can also save you money by ensuring the most competitive factoring lenders are introduced to you.

08 Sep

Confidential Invoice Discounting – Flat Service Fees »

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Recently I have seen quite a few confidential invoice discounting clients looking for flat service fees. The most recent being a recruitment business with a turnover of £56m. I asked why the flat fee was attractive and was told it “impacted less on margins.” Who am I to argue with someone who has a built up such a large recruitment business and has been a user of invoice discounting for over a decade. I did however feel that it warranted a comment on the forum.

So what are the benefits of a flat monthly fee? Well I guess it is easier to budget and potentially cheaper for a company with a rising turnover but in reality the costs should not differ dramatically to a percentage based fee. The way the flat fee or percentage based fee is calculated will be the same for any lender anyway. Most lenders will arrive at a monetary service fee and then convert it to a percentage of gross turnover anyway.

There is obviously a requirement for flat fees though as one of the ‘new kids on the block’ Gener8 Finance use this as their USP.

Personally I can’t see the advantages but I guess it provides certainty and in times such as these something has to be said for that.

I would however welcome anyones thoughts on this……

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