Tag Archives: factoring

Weekly digest

The week completed 13th November, 2015

JMS

Factoring Partners

Factoring Partners can save you time & money!
Factoring Partners can save you time & money!

As Factoring Partners enters its 20th year of trading this week looks at types of finance raised and the capabilities now.

Back in 1996 the very first business assisted was an importer and distributor of footwear with funds raised enabling purchase of a consignment from (I think…memory fading) Portugal. The second business was a facilities management business providing repair/remedial work to local authorities and councils. This business remained a client for 15 years.

The first two clients very much reflect what happened subsequently with some clients seeking relatively short term finance to assist with a specific transaction whilst others bought into long term relationships.

Over 50 different financiers have been used and we remain capable of offering businesses an entire appraisal of the commercial finance sector. This is attributable to our independence, many competing brokers are effectively tied to a limited collection of lenders given the reciprocal nature of relationships they have.

We have sourced and placed asset finance (from trains to cars to heavy machinery), property finance (from owner occupied to rented), invoice finance, trade finance, export finance and, most recently, short term finance for a retailer.

Businesses helped cover an enormous range in terms of activity (all manner of manufacturing, distribution, importers etc) and by way of size go from a £50m t/o (annual) business down to £25k.

As mentioned in previous blogs there are plenty of lenders, from the generic (who will write most facility types, such as the banks) to the highly niche. Our job is to know as many as possible to facilitate the most appropriate referral. Lenders continually change their credit policies and again it is our job to keep up to speed, the aim being to save businesses time and money in their quest for finance.

We can source business finance same day (seriously, up to £120,000) or work to time scales as dictated by the enquirer.

In 1996 when Factoring Partners first started the internet was very much in its infancy and the capabilities it brings to businesses, at that time could not be imagined. Whilst communication and marketing methods have changed materially in the last twenty years one constant that remains is the need a business has for cash and that is where Factoring Partners can and does help.

Weekly digest

The week completed, 1st May 2015

JMS

As an independent broker within the invoice finance world this week has seen a curious mix of the traditional enquiry (recruitment business) to the new (professional services) with a speciality (very speciality!) clothing business for good measure.

Regardless of activity and its always good to talk to businesses across different sectors, the motivation for talking about invoice finance is the same. Additional cash, over and above the level provided by a bank overdraft, will bring material, quantifiable advantages to each business.

At its core this is what invoice finance brings, there are peripheral benefits too but extra working capital is the primary use and advantage. It seems many businesses still believe it is only the high street banks that offer business finance but the range of funders continues to grow bringing real choice and variations in service levels, rates and security requirements.

Advice is vital and the banks are ill equipped to provide it, partly because a whole swathe of experienced, knowledgeable bank managers have left and partly because they cannot offer the appropriate facility or service. Bad advice is worse than no advice so talking to an experienced, independent broker has real merit.

The election rumbles along and whilst in the past they have been used as a means of avoiding any decision, businesses this time seem to be making decisions about funding, possibly in the recognition that the aftermath of the election is likely to be a state of limbo. The possibility of a two election year (such as 1974) fills most with dread!

This time next week the politicians we admire so little will be in deep discussion with each other, at our expense, cutting deals to grab the  power they crave. (Sadly the offices of Factoring Partners will be closed next Thursday and Friday as a late Spring invoice finance conference takes place in Barcelona)

voting paper

General Business Tips

Reduce Your Factoring Costs

JMS

cutcosts2

5 Ways to reduce your factoring charges.

  1. SWITCH FUNDER
  • Invoice Financiers rates vary considerably and significant cost reductions can be achieved
  • An independent broker will help with this by suggesting no more than 3 alternatives. Talking to more than 3 will lead to ‘factor fatigue’ and incur great levels of  duplication (& associated cost)
  1. RENEGOTIATE
  • Invoice Financiers do not like losing clients and they will reduce rates to prevent client loss.
  • If you have been with your funder over a year formally review rates.
  1. CONSIDER ALTERNATIVE INVOICE FINANCE OPTIONS
  • The invoice finance market continues to evolve and many options are now available, there’s single invoice finance, internet auction platforms, selected debtor finance, optional credit insurance and many other options.
  1. FOLLOW THE RULES
  • As with many business models in other sectors, miscellaneous, or other, sometimes hidden charges, can be evident.
  1. CONSIDER OTHER FUNDING SOURCES
  • Away from conventional invoice finance and banking there are other funding sources that could replace or improve upon an invoice finance line. These include peer to peer or crowd finance as well as private equity.

Invoice finance costs can be reduced in many circumstances with those savings directly helping your business. An independent broker can help but they must:-

  • Have invoice finance experience.
  • Be independent, they shouldn’t be making introductions simply because of a referral relationship

They will be able to :-

  • Understand your business and your finance needs
  • Know which financier will be most likely to support
  • Assist, if necessary with any aspect of the discussion.
  • Source the most suited facility without the need for excess duplication
Invoice Finance Charges

Costing Calculator

JMS

feesI have been asked why there’s no calculator on this site to help a business establish the likely costs incurred in implementing an invoice finance facility.

No two businesses are the same and the cost of any funding and service facility is unique to a specific business. A calculator will take some very basic information and provide a possible charge. At best the figure given will be purely indicative and at worst it could be misleading.

I will happily talk you through the likely charges involved in any invoice finance facility

Factoring

Thinking of Factoring – Read On

JMS

If you are looking to factor for the first time here are some useful tips

 

  • The main motive for this type of facility is generating cash, make sure you know how much cash your sales ledger will generate. As brokers we have seen far too many occasions where lenders have quoted 90% but when the day comes the actual amount is much much less
  • Be aware of all the costs – not just the headline service charge & interest rate quoted – this means looking deep into the agreement!
  • Check carefully the base rate applied to the agreement. Lenders will quote an interest charge usually as Base Rate +. Check the base rate applied
  • Make sure you know the full implications of any guarantee you are asked to sign.
  • Check the contract length – do you really need to sign a 3 year agreement?
  • Talk to some existing clients. Any prospective lender should offer you some names, these will obviously be names the lender knows will be favourable but it’s still worth a few minutes. If the lender cant, or wont, then beware!
  • Ask what the average collection period is, Factoring companies should pride themselves on their ability to collect outstanding invoices
  • Find out the actual collection process the Factoring company employs, do they only send letters or will they make phone calls.
  • How easy is it to get out of the contract if you decide it simply isn’t for you.
  • Speak to an independent broker (make sure they are not owned by a Factoring company – some are) to gauge the overall reputation of the company with which you plan to sign up.