Factoring

You’re not the only person to say good things about Skipton Andy and I’ve never had a problem with them when our suppliers have used them either. 3% is slightly on the high side, although not really excessive, charges tend to vary depending on your turnover, number of invoices and average invoice amount.

The 3% is only the service charge element of the fees (and don’t forget that’s payable on the whole invoice amount, including VAT), there’s also the interest on the actual funds advanced which could be anything between 2% & 6% over base rate. There are often other costs involved as well, so it pays to check out the small print properly.

Mick, the problem that your guy might have is that most factoring companies aren’t keen to lend when a large proportion of the sales ledger debt is owed by a single ‘prime debtor’. They tend to restrict the amount that they will lend based on invoices to any one debtor; either on the basis of a percentage of the total debt or a fixed ceiling for each debtor. So if you’re owed £90,000 by Megabucks Corp and a total of £10,000 by 20 other customers they might only fund 85% of the first £20,000 for Megabucks and 85% of the £10,000 – meaning that they’ll only advance you a total of £25,500 against your £100,000 sales ledger. I believe there are a few smaller factoring companies that don’t impose these restrictions, but, as with other companies offering loans that aren’t attractive to mainstream lenders, you need to be very careful about what you’re getting in to.
 

Posted under Courier Financial Issues

Posted by Alec at 9:50 am, November 15, 2007

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