0845 643 9485
Call now for expert advice

Free, instant quote

Free, instant quote

Non Recourse Factoring

02 Aug

Invoice Finance or Overdraft »

by

I quite often speak to businesses who are considering whether to use invoice finance or an overdraft. They will usually ask which is the cheapest.

In short an overdraft is almost always cheaper than an invoice finance facility. I have read on other websites that the interest rates are lower for an invoice finance facility than they are for an overdraft and I would agree. However, the interest or discounting fees on an invoice finance facility is dwarfed by the service fee costs. By way of a simple comparison an overdraft may attract a 1% arrangement fee so for a £100,000 overdraft the arrangement fee is £1,000. This is compared to a £100,000 invoice finance facility where a 1% service fee could be levied against the gross turnover of the business. If the VAT inclusive turnover is £1m then the annual service fee is £10,000.

So is an overdraft cheaper? Typically yes.

So why would a business use an invoice finance facility? In short because an overdraft is not available. Banks no longer secure overdrafts by way  debenture where the major asset is the debtor book.

Therefore for many businesses an invoice finance facility is the only option. If you are one of these businesses looking for a working capital facility to ease cash flow pressures it is important to consider your options. Whether you are factoring or invoice discounting it is important to remember that the lenders are not the same. They all have very different capabilities, criteria and pricing structures.

31 Jul

Factoring London »

by

Factoring in London is available from several companies. The London office of Smart Factoring Quotes based in York Street is well placed to advise any company on the invoice factoring and invoice discounting options available to them.

As a London based company looking for factoring you have access to the factoring arms of the major banks along with the London based independent invoice finance companies. This includes most of the major players. Importantly you also have access to the independent factoring companies from outside London. There are some great offerings from companies based in the North such as Manchester and Leeds but also from independents based in the South East and the South West such as Bristol.

The geography of your provider should not be a major consideration. Far more important is the ability of that lender to meet the unique requirements of your business. With any type of invoice finance facility, whether it be invoice discounting or factoring the structure of the facility is everything. It will determine how well it will work for you. Pricing is obviously important but should always be second to structure.

15 Jul

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

by

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.

12 Apr

Non Recourse Factoring? »

by

Non recourse factoring seems to cause some confusion and I must admit it has caused me to raise my eyebrow on occasion.

A true non recourse facility means that once a debt is notified and you are within the credit limit set by the lender you have nothing to worry about. If it goes past the agreed ‘recourse period’ the debt is settled by the lender.

However, some lenders offer credit protection/bad debt protection/ credit insurance alongside their finance products but this is not true non recourse. Any bad debts rely on you as the client making a claim. During the settlement period the debt in effect could be recoursed back to as far as funding is concerned. Alternatively the lender may continue to finance that particular debt at the clients expense.

If non recourse factoring is what you are looking for it is important to ensure you understand how any bad debt must be claimed for but also how it will effect your funding.

If you want to know more please contact Smart Factoring Quotes.

Recent Posts

Twitter Updates

    Our Network

    © 2023 Invoice Factoring Forum | Sitemap