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Invoice Finance is the generic terms that describes both the industry and the product that provide finance against invoices that a business raises to other businesses.

Under the umbrella of invoice finance there are various products including:

Invoice Discounting – this is where a finance company will provide finance against the invoices raised by a business but the responsibility of collecting the debts in remains with the business itself. This type of facility can be either disclosed or confidential.

Factoring – this is where an invoice finance company purchases the debt from a business and not only provides finance but also provides the credit control function – i.e. they chase the debts. Disclosed factoring is by far the most common form of finance however confidential factoring can be sourced.

CHOCS – this stands for ‘clients handles own collections’ and operates in the same way as a factoring facility. However, the  factoring company allows the client to do their own credit control.

Beyond this there can be recourse and non-recourse facilities for all these types of facilities.

When choosing your facility it is important to consider what you require from the facility and then it is worth speaking with an invoice finance broker to see what facilities will best meet your needs. It is important to remember that each lender has it’s own criteria and capabilities.

I was recently helping a business in Leicester source a suitable invoice finance facility after their bank owned invoice finance company had decided they no longer wanted to support.

The proposal was a challenging one for a number of reasons but I love a challenge and was confident that I could assist. I was let down by one lender who despite understanding the challenges on day 1 took the lead forward for 2 months and then declined it based on the same challenges I had advised them about on day 1. This didn’t help!

Anyway, another broker had got involved and introduced another lender who aims to do the deals that other lenders will not do. Their position in the market is a good one and they are a valuable source of finance to companies that perhaps would not be funded to other lenders. However, they do charge accordingly and in this instance I did feel that a more traditional type of lender was appropriate.

I managed to secure an offer of invoice factoring from an independent invoice finance provider that was some £3,000 a month cheaper than the offer he already had from the other broker. The client was delighted and signed all the paperwork to proceed.

However, he had signed all the paperwork with the other lender having been advised it wasn’t legally binding until he owed them any money. This was the brokers advice rather than the advice of the invoice finance company concerned. Part of the documentation was a debenture that was promptly registered at companies house.

When it came down to transfer this debenture was a bit of a spanner in the works, although it shouldn’t have been! The lender that had registered insisted on £3,000 for the release of the debenture which the client promptly paid. In my opinion this debenture could have been cancelled by submitting a form to companies house.

There is an argument that my client led the other lender a merry dance and incurred them a lot of work and as such the fee was justified.

The moral of the story is be careful what you are signing with invoice factoring companies and be careful who you take advice from. The brokers advice in this instance was at best questionable.

Ultimate Finance Group Plc  have today announced that they have acquired Ashley Commercial Finance. Both are independent providers of invoice finance with Ashley firmly targeting the smaller end of the SME market.

They will trade as two seperate brands and Ashley will keep the same management team. However, to add value and reduce costs I am sure there will be some rationalisation going forward.

Ultimate Finance had their shares suspended a couple of weeks ago as they were going through this ‘reverse takeover’. It is termed a reverse takeover because Ashley are in fact the larger entity.

I have longstanding clients with both Ultimate Finance and Ashley Commercial Finance so they can deliver good service levels.

I was interested to read on the FSB Forum about factoring, how bad factoring is for businesses and how the FSB should actively advise businesses of this.

I am sure everyone agrees that the FSB promotes the best interests of small businesses. If indeed factoring is the nemesis of the SME then why do the FSB actively promote their own white label to members? FSB Factors is the white label factoring product of the FSB. They describe factoring as ‘ideal for small businesses’ and ‘more flexible than overdrafts’

The service is actually provided by RBS Invoice Finance and prior to 2007 I believe it was provided by Lloyds TSB Commercial Finance.

The FSB obviously feel that there are benefits to businesses in using an invoice finance facility and I agree.

I am invoice finance broker and openly admit that I take commission from invoice factoring companies for arranging invoice finance facilities. I am impartial and independent and I work with the whole market. I believe that this is the only way a broker can operate. The right lender will differ depending on each businesses requirements and circumstances.

So why do the FSB promote a facility via RBS? How do they choose the most suitable provider? What are their motivations?

Well the FSB and most trade organisations have 3 motivations when choosing any of their ‘partners’. Firstly, they want an added benefit for a member. This means that they want an offering that is exclusive to FSB members, i.e. 10% off for FSB members. This justifies joining fees and attracts new members. Secondly they wish to grow membership numbers which is why they look for benefits to members. However, if an organisation can offer them access to businesses who could be potential members this is a big advantage. The larger the membership the more power they have when lobbying. Thirdly they will look to generate income which is put to good use for the benefit of members.

While I have no doubt that the FSB’s actions are aimed at benefiting their members I am not sure that in promoting RBS as a one size fits all solution to invoice finance they are doing the right thing.

The invoice finance market is made up of a variety of lenders for good reason. each one has a unique offering and small businesses should use this to their advantage.

Recently I was contacted by the sales director of Hitachi Capital to ask me what my perception was about them with a view to me introducing clients to them. Hitachi are an independent provider of invoice finance.

I think that it is admirable that invoice finance lenders are pro-active in building and maintaining relationships with invoice finance brokers such as myself and even more admirable that they care what people think of them.

By way of background Hitachi Capital (UK) Plc had bought the independent invoice finance company London Scottish and since the takeover there had been a fair bit of turbulence as credit policy changed and the personnel changed. As such I had not dealt with them.

However, I must say that my perception was that they were risk averse and expensive. I must also say that this was purely perception and wasn’t based on any facts. If I am honest it was probably based on a conversation with their previous MD who had left after the culture changes post takeover.

There was an element of surprise from their sales director John Atkinson and I was told that their pricing is very competitive and that they have award winning service levels. I hear this all the time and did wonder what award they had won for service levels but I must say that in speaking with John I did gain some comfort from his humble approach. He didn’t use the downfalls of other invoice factoring companies to build his case he just gave me some examples of what they had done and asked for an opportunity to prove what they could do.

I had several inquiries from clients who were looking to improve service levels and improve pricing so I decided to introduce Hitachi to a couple of clients alongside some competitors that I trust. After all my role is simply to explain to a client what options are available to them and allow them to make an informed decision. Hitachi were very responsive and were the first to book appointments in both instances. Their terms were also the most competitive! Both clients accepted their terms and were delighted with how the meetings went.

Our relationship is in it’s infancy and I can’t comment on their ‘award winning service levels’ but I will definitely look for feedback from the two clients who have accepted terms from them once they are on board.

It is refreshing to see a lender who genuinely delivers what they promise with a humble approach. Their sales guys mirrored this approach with a solid delivery of what they were about.

This is in stark contrast to a couple of independent invoice finance companies who approach everything with a swagger. The companies I am thinking of give out the title of ‘Managing Director’ to anyone that runs a sales team even though they lack true decision making authority and their approach can only be described as arrogant. There are lenders out there who are more swagger than substance and there is nothing worse than a lender who over-promises and under-delivers.

Hitachi Capital will not be the right lender for everyone and no single lender is. But they are welcome addition to my panel of lenders and I am glad John Atkinson picked up the phone.

Factoring in Scotland is readily available for businesses selling to other businesses on credit terms. If you are looking for a factoring facility in Scotland it is worth visiting the Smart factoring Quotes website.

Scotland is serviced by several factoring companies such as RBS, Lloyds, Clydesdale, Aldermore, Close and Bibby. There are also other invoice finance companies that can service Scottish clients. Choosing the right company for your business is however the biggest challenge.

Most factoring companies in the UK are happy to provide invoice finance facilities in Scotland if the entity is a registered company in England as there is no difference to funding a company in England. However, I understand issues arise if the company is a Scottish registered company. I am told the issue relates to registering debentures.

If you are a Scottish registered company you still have a choice of lenders beyond the Scottish banks. If you are a company registered in England then your range of choices is much wider.

If you are looking for Factoring in Scotland it is worth contacting Smart Factoring Quotes to see what your choices are.

UK Business Insolvencies are down 13% in June.

This year on year decline is shown in the insolvency index published by Experian. In June 2009 some 2,044 surveyed firms failed compared to 1,771 in June 2010.

Interestingly firms in the North East of England had the highest rate of insolvency in both June 2009 and June 2010 although the rate had fallen over the year. Looking at the figures as a whole does show a North versus South divide with lower insolvency rates in the South.

As a sector the transport sector had improved the most. Insolvency rates were down  from 0.12% to 0.07%.

While these figures do not mean a lot in isolation it has to be good to see a drop in insolvency rates.

Certainly invoice factoring companies will welcome the news.

Our client is a haulage company. They approached Smart Factoring Quotes to seek advice on how best to set up an invoice discounting facility. They were keen to obtain a facility that allowed ‘export invoices’ to be raised to their european clients for the backloads that they carried back to the UK.

Our client had been through challenging times because of rising fuel prices and exchange rate fluctuations. However, they had maintained turnover and had a well established business.

They had been offered factoring facilities but felt that they were best placed to collect in the debts as they knew their customers best. As such they wanted an invoice discounting facility.

If you look at the whole market of invoice finance companies not all are able to provide invoice discounting. Our client was raising export invoices which reduced the amount of lenders able to assist even further.

Through our knowledge of each lenders capabilities and criteria we were able to introduce lenders that were genuinely capable of helping and more importantly were actively seeking new clients.

As such we secured a confidential invoice discounting facility for our client at very competitive rates.