Invoice factoring Company

28 Aug

Factoring »

Factoring is a valuable source of Factoring is also an opportunity to outsource the credit control function of the business. This ensures that the debts are collected in a methodical and effective manner which reduces your borrowing costs and reduces the risk of non payment.

The credit control does mean that factoring is more of a service than a finance facility and as such can differ dramatically from lender to lender. Factoring companies will use a variety of methods to chase outstanding debts. Some invoice finance lenders offer the most basic service of sending out automated letters and statements which in itself is at least a methodical approach which should produce satisfactory results. Other companies will add to this basic service and will telephone each debtor to chase the outstanding invoices. This more hands on approach should be more effective and will allow disputes to be highlighted quickly.

It is important when comparing quotes to establish what service you are receiving for your money.

Factoring also offers an advantage to a lender over an invoice discounting facility. Over and above the additional income generated by a factoring facility it also reduces the risk of a lender. They are closer to your customers and in the event of failure the invoice factoring company is better placed to collect the debt as they have always been actively involved. By having contact with customers they can also verify that invoices are genuine and the risk of fraud is reduced.

So factoring offers benefits to both invoice factoring companies and borrowers alike.

24 Aug

Factoring in Ireland »

by Invoice Factoring Forum

Factoring in Ireland has become increasingly difficult in recent years as the economy and banking industry in particular has been hit hard.

Arguably when companies require cash flow facilities the most the Irish banks have not been in a position to help except in the most straight forward of cases.

There are however, several invoice factoring companies in Ireland who have stepped in to fill this void. As such Smart Factoring Quotes Ireland was set up to help Irish businesses find the lender best suited to meet their needs.

18 Aug

Time to change Invoice Factoring Company? »

by Invoice Factoring Forum

Over the last two years we have seen a fair amount of inertia from both clients and lenders alike.

Invoice finance clients have tended to stay where they are and ride out the storm of the recession. Most of the clients we have seen move have been clients where the relationship has broken down to an extent that they have had to move lenders.

Invoice finance companies have also seemed to be fairly static in that they have not actively been seeking new business and have been wary about any client looking to transfer from another lender.

I am sensing this has now changed. The major banks are actively seeking invoice finance clients again and are taking on sensible risks again at good rates. A large well backed independent invoice factoring company approached us last week advising they would not be beaten on price. It is great to see an independent competing with award winning service levels and on pricing.

Clients seem to have sensed that it may be a time to change as our inquiry levels have increased dramatically in the last couple of weeks. These clients are right. There is no need to put up with overpriced facilities and poor service levels. It is well worth seeing what is available in the market place.

If you feel that we can help visit Smart Factoring Quotes and get in touch.

18 Aug

The Hidden Costs of Using a Lenders Credit Protection »

by Invoice Factoring Forum

This is just a short post about using credit protection or credit insurance for a ‘non-recourse’ facility.

Some invoice factoring companies will offer their own policy that they underwrite themselves which will offer a true non recourse facility. One such lender is HSBC Invoice Finance and they offer a ‘Payment Under Guarantee’ where any covered debt is settled after 120 days. These policies can work very well but in terms of costs they are added to your service fee and as such are subject to VAT.

The alternative is to use a third party credit insurance company. Some argue it is better to let people do what they do best so in this instance they would use an invoice finance company for funding and an insurance company to provide cover against risk of non payment. In some instances better cover can be obtained against your debtors but it does mean managing two supplier relationships and it is important you comply with the requirements of the insurance.

17 Aug

Why does invoice finance take so long to set up? »

by Invoice Factoring Forum

Invoice Factoring Company – Why does it take so long to set up a facility?

In short it shouldn’t.

The process should in theory be fairly simple for most businesses. The key is to finding lenders that have an appetite for your business in terms of size, sector and geography. From there the key is providing total transparency.

The process will usually start with a first visit by a sales person from the lender. They should assess your suitability and issue you with terms. This is a key stage as if they don’t address potential issues early on you could be going a long way down a road that will not have a positive conclusion.

If you accept the terms the lender will conduct a pre lend survey which is a mini audit focusing on your processes surrounding invoicing and collecting in debts.

If this goes well a final offer will be issued to you and legal documentation signed. If there are any questions you may be asked for further information.

The final step is usually the verification of your sales ledger and perhaps a reference from your existing invoice finance provider if you have one.

All in all the process can comfortably be done within 3 weeks with most lenders. I have seen deals done within a week where necessary.

So where do delays occur when setting up an invoice finance facility?

It is important to remember that you as a prospect will have a lot to do in this process and a lot of information to provide. This can use up a lot of time as an invoice factoring company will be waiting on you.

Sometimes if information is not disclosed from the outset or the sales person does not ask the right questions the facility can fall down at the later stages meaning the process starts again with another lender.

To ensure things go smoothly divulge anything you feel is relevant at the outset. If the sales person has not demonstrated a good understanding of your business how can they hope to convince their credit team you deserve a facility. If they do not give you confidence move on to another lender. Provide information in a timely fashion – this saves times but also instills confidence.

If you have any doubts it is worth using a reputable invoice finance broker.

17 Aug

The Bank Says ‘No’ »

by Invoice Factoring Forum

In a recent study by the Institute of Directors (IoD) is was found that 1 in 4 UK businesses have tried to access finance via their banks. Unfortunately almost 60% of those businesses had their applications rejected. What was more worrying was that 83% of those businesses has received no information regarding the available alternatives.

The banks should be offering the government’s Enterprise Finance Guarantee Scheme (EFG) whereby the government guarantee 75% of the facility thus limiting the banks exposure to 25%. There is an argument as to why the banks would lend 25% against a project or to a business that they didn’t believe in but it does at least limit their exposure. They should at least be promoting this facility but it seems to face the same issued that the SFLGS did in terms of lack of acceptance by the banks.

On that basis it is interesting to see invoice finance providers bolstering their offerings with the EFG scheme. I am not sure how active they are in lending but I have seen a fair amount of PR relating to invoice finance providers offering the EFG which is more than can be said of the banks.

But realistically what are the finance options outside the banks?

Well beyond the banks asset finance arms who offer finance against real business assets. They tend to avoid softer assets such as IT and office furniture but will happily consider plant and machinery along with vehicles. Just because you bank has said no to asset finance other options do exist.

The same can be said with invoice finance. The bank invoice finance arms are the most risk averse. As such, just because you have been told ‘no’ does not mean there is not a suitable facility out there for you. The independent invoice finance market can deal with most scenarios.

The commercial mortgage market is severely subdued and lacks alternatives outside the banks. Roughly 2 years ago a dozen or so lenders withdrew from the market literally overnight and that vacuum remains to be filled.

I think businesses need to be flexible in their approach to sourcing finance and maximise the security that sits within the business. That means seeking specialist forms of finance from specialised providers. If your bank can offer 80% against your debtors can an independent specialist invoice discounting provider offer more? The same applies to asset finance and commercial mortgages – shop around and maximise the amount of finance you can generate.

16 Aug

Back Office Service Providers – Beware »

by Invoice Factoring Forum

I have recently taken on a case for a client who is leaving a back office service provider and wanted to highlight some risks associated with employing such a company.

My client is a recruitment business who use a back office service provider to raise invoices, do the payroll, credit control, etc.. This service is similar to factoring but is typically provided to temporary recruitment agencies as an opportunity to outsource almost everyting so the business van focus on sales and placements.

These services receive varied feedback in terms of service levels but unfortunately in this instance the implications are for more serious. The lender concerned has failed to pay over circa £500,000 of monies that was due to HMRC and do not appear to be in any position to do so soon. It would appear that our client remains ultimately responsible for bringing the situation up to date with HMRC.

I understand there was a similar situation with a payroll finance company called Wageroller who went under leaving their clients owing large sums to HMRC.

There are obviously some very reputable providers and Lloyds TSB are possibly the largest with their Cash Friday facility. The fact remains that not all other providers seem to be as reputable or as financially robust so be careful.

I have not mentioned the providers name as I have not spoken to them to hear if there is another side to the story. It does however raise concerns and is certainly worth a post.

16 Aug

Will interest rates rise and will that effect your factoring costs? »

by Invoice Factoring Forum

Interest rates in the form of the Bank of England base rate have remained unchanged at 0.5% for the last 17 months. These low base rates seem attractive to borrowers but are crippling savers who rely on the income their savings generate.

Will rates rise? I think the evidence overwhelmingly suggests that these ultra low rates are not sustainable and as such, yes rates will rise. In a poll of economists by Reuters (29 July) the conclusions were that interest rates would rise from April-June 2011. It was thought that they would rise to 1.5% be the end of 2011.

If you are a factoring client, how will the impact on your costs? Well in some cases it will obviously increase your costs of borrowing money as your discounting fee is made up of a margin and a base rate. As the base rate rises then your costs would increase surely? The answer is maybe. It will differ from lender to lender.

HSBC invoice finance for example have no minimum base rate so any increase from the 0.5% Bank of England base rate will be felt by their clients who are currently enjoying these very low rates.

However, Bibby Financial Services are currently using 3 month LIBOR as a base rate and in the quotations I have seen are using a minimum base rate of 3%. This means that until the base rate (3 month LIBOR in this instance) increases above 3% their clients will not be effected by the potential base increases.

Close Invoice Finance use 1 month LIBOR as a base rate but have an overall minimum discounting fee of 4.5% . So any base rate increases would only impact on the clients of Close Invoice Finance if their total discounting fee increases above 4.5%.

Looking at the invoice finance market in it’s entirety there are a lot of clients who won’t feel the impact of any impending rate increases for some time.

Is this good news? It depends on how you view matters but some may argue that the ones who will not feel the effect of the increases are paying too much at the moment anyway. Then again, you can only choose the best of the offers that are made available to you.

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