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General

Debt factoring is not the best of terms when speaking about invoice factoring or factoring. However, it is a commonly used term.

In essence debt factoring, factoring and invoice factoring are all the same thing.

If you have invoices or debts outstanding from your customers then you can release valuable cash by debt factoring. factoring companies will pay you up to 90% of the gross invoice value and they will give you the balance when your customer pays.

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.

There seem to be several invoice finance brokerages appearing that are linked to insolvency practitioners. Only today I was asked by a client of mine why this was so I thought a post may be due on the topic.

In short the insolvency practitioners see the invoice finance leads that give to lenders as a carrot to attract insolvency work from the lenders. In fact some of the IP owned brokers will only give leads to lenders if they give them insolvency work in return. I have seen some e-mail marketing from one such broker offering 2 new deals to a lender in return for a ‘fee generative appointment’.

Reciprocity is a buzz word in many industries these days and the invoice finance industry is no different.

However, in my opinion it does raise concerns for business owners who approach these brokerages looking for independent and impartial advice about factoring or invoice discounting. There is every chance that the business will simply be placed with the lender that they ‘owe’ a deal to. If this is the case it means that they are not really acting in the best interests of that client.

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.

I am quite often approached by clients who insist on using confidential facilities. The reasons for this can be varied and I always try to accomodate their requirement.

Traditionally confidential invoice finance has been hard to obtain as the only product available was confidential invoice discounting. The criteria for this were quite rigid and it was reserved for large, profitable business with a good finance and administration function.

The good news is that confidential facilities are now more readily available than ever. This makes the life of an invoice finance broker much easier as it means we have a wider range of products to offer clients based on their unique requirements.

Confidential facilities now include confidential factoring, confidential CHOCS there is a new confidential product due to be launched in January 2012 which we are quite excited about.

Temporary Recruitment companies will often use some form of factoring or invoice discounting. It is almost a necessity in terms of how their cash flow works. Typically they are invoicing clients on 30 day terms and yet they are having to pay wages on a weekly basis.

A factoring agreement can provide up to 90% of the invoice value the day after the invoice is raised. This means that wages are covered and you don’t have to worry about waiting for clients to pay.

As an alternative to temporary recruitment factoring there are also full back office solutions that will take care of almost everything except finding clients and temp staff!!

If you are looking for a funding solution for your temporary recruitment company it is worth speaking to Smart factoring Quotes to fully understand what your options are. Smart Factoring quotes have helped to source facilities for temporary recruitment companies who are new starts all the way through to companies with turnovers in excess of £50m.

Spot factoring seems to be gaining popularity within the UK and is a fairly common procedure in the US. We are talking about factoring a single invoice as opposed to factoring whole turnover as you would with a traditional factoring facility.

Obviously if you have an ongoing requirement to factor each invoice or the majority of your invoices it makes sense to seek a suitable factoring facility.

However, if you are looking for a short term solution to a cash flow “hiccup” then spot factoring can be ideal. It means that you can factor a single invoice and once that is paid you have no contractual obligation. You can also revisit the “facility” further down the track if you have another invoice you wish to factor. In essence you can “dip in and out” as you need to.

This can be quite attractive to some businesses. So what are the down sides?

In short the interest rates can put some people off. Most lenders will quote a daily interest rate which sounds nominal. However, this can equate to an APR of circa 80%. But does this make it more expensive than traditional factoring?

Well the interest rate is 10 – 20 times more than what you will pay on a traditional factoring facility but your debt may only be outstanding for 30 days. Traditional factoring can attract minimum service fees and minimum contract periods which can mean if you have a genuine short term requirement traditional factoring can be expensive.

While rates for spot factoring may well be higher than the rates for whole turnover factoring, if you have a genuine short term requirement spot factoring will typically be your cheaper option in terms of pounds and pence!!

So is it the future? I am not sure but it is another valid solution for many businesses so it should be embraced.

Invoice Finance is available in Newcastle from a large selection of lenders.

The challenge is to find the best lender to meet the needs of your Newcastle based business.

This will depend on a large number of factors including your financial status, turnover, sector, how you raise invoices and who your customers are. Each invoice finance company has their own individual criteria and characteristics and because of this there will be on particular lender who is best suited to meet your needs.

Smart Factoring Quotes understand each lenders criteria and capabilities. This allows us to source the best possible facility for your business.