[Karl Wheeler]

Hi
Has anyone used a factoring service for payment of their invoices. Our company has been growing steadily over the last year and along side that our wage bill has grown too. I am sure most of you have come acrossed cash flow problems at sometime and wanted to know if factoring was more cost effective than having a large overdraft.

Regards
Karl

[carpet guy]

Looked at it and decided to press creditors instead. Factoring is going to take around 6% off your gross income and you really need to check the details.

rob



 

[garyj]

Don't do it. Lloyds used to be notorious for persuading customers to sign up with Alex Lowrie, who Lloyds own.

It sounds good but that 6% rapidly turns into a lot of money, on top of that the transfer fees are £30.00 for CHAPS. They typically forward you 80% of the invoice total and the system they use is VERY complicated.
We used to get letters from the company we used every day ( can't remember their name, but they were in Brighton ), the paperwork was mountainous.
They also set you a limit, say £30k, and it was surprising how quickly you hit that, our customers were not happy with the arrangement either. For an added fee they will chase your customers for payment, but in reality they don't as it's not in their interest to do so, all the while that money is outstanding you are paying the interest.

In short, no matter how tempting it looks, don't do it, you'll loose a sense of owning your own company.

Is it Lloyds by any chance that has suggested this to you?

[Karl Wheeler]

Hi Gary and Rob
Thanks for your advice.I have had no company or bank suggest this service to me and just looking at ways of getting the funds in to the bank to meet the wage bill each month.

Karl

[trevor perry]

instead of paying a company 6% to factor the money why not offer a discount of say  3% on all invoices that are paid within 7 days or what ever time period you require.

[martin19842]

hi there

thats weird, when we looked into this the charges were nothing like that.  it was working out the equivalent of employing a sales ledger person/credit control

but in the end we didnt go down the route.

your customer base has to fit a template for them to take you on, not just tyoe of customer, but customer numbers and debt percentage spread.  if you dont fit that, then yes they might lift the charging rates.

the other point is, that if you are into the bank on an overdraft or loan financing position, then the bank will only allow you to realise xxxxx amount from your book debt so that the Bank exposure is always covered.

regards

martin

[garyj]

The bank or factoring company won't let you have an overdraft if you factor. The theory is you shouldn't need an overdraft if you factor.

You're right Martin, the % book cover is a nightmare, if you have a big contract and they with-hold the money for any reason then they simply take it from the smaller invoices.

When you get into it, it is a very complicated system, and very very difficult to get out of.

[martin19842]

hi there

at the end of the day it all depends how you want to finance your business,

a big plus of factoring, is that you dont have to run a credit control depsrtment, irrespective of your business size, even the smallest one person company has to spend time chasing debtor monies.

therefore if the overall cost of factoring, invoice financing or whatever way its presented is cost effective and i dont just mean the charges.

your chasing time-  outstanding monies
your time - negotiating finance with bank when required.
the additional work you can do not having to do the above
the cost of your current overdraft or financing
the removal of pressure from creditors chasing their money.

you need to look at the total business picture, to make an informed decision.

regards

martin

[PHILC]

I factor all my invioces and I have nothing but praise from my factoring company.
I use a company call Bibby Factors.

I spent the first year of trading on my own with no help and I got sick and tired of spending ages on the phone chasing payments for invoices from the larger building companies and wondering if i was going to have enough for staff wages as the bank i was with were less than helpful to say the least.A friend of mine suggested it as i had never thought this existed
I run a relatively small cleaning company turnover is around 110k a year and its nice as all i do is submit an invoice to the factors and within 24hrs I can have up to 70% of the total invioce in my bank which is ideal no cashflow problems or overdraft to worry about.

Now dont get me wrong there are drawbacks ie charges etc but it would cost me more to employ someone to chase money for invoices and its less stressful. I find companies dont mess you about as much either as you have got the factors on your side if you have any trouble with companies paying your invoices and they will do all the legal bits and pieces if needs be.

If anyone is interested in factoring drop me an email and I will be happy to answer any questions.

[Atlantic Cleaning]

Hi

Try these Factor21 I used them for years and they were great got all invoices paid in around the 30 days, they were friendly and good value even the customers liked them so cant fault these at all. If you are going down that route I will highly recommend Factor21

But a word of warning there are some bad ones out there who will charge the earth and tie u up in contracts and do nothing for their money.

Hope this helps

I will try and dig their number out for you

[Karl Wheeler]

Hi Atlantic
Thanks if you can give me some contact details that would be great
Karl