Which Factoring Company?

Which factor?

Not all factors are equal. Currently there are around 50 factoring companies in the UK and these range from subsidiaries of the UK clearing banks and large overseas banks to small independent factors specialising in moderate levels of debt for smaller companies.

The choice of the correct factor for any business can be a difficult one as there can be considerable differences between the service levels and range of services offered. For example quite a large number of the smaller companies offer only full service factoring and cannot offer a client a graduation to confidential invoice discounting as and when the client is ready for the transition.

The first advice to any prospective business considering entering a factoring arrangement is not to be sold a product too quickly by an over-enthusiastic salesman. Consider the options carefully and be sure to negotiate the best deal for your business

The following areas should be considered

• Make sure you are comfortable working with the account management team as well as the salesman who signs you up for they are unlikely to be one and the same person.
• Ask for references from existing customers of the factoring company. If an intermediary introduces you to the factor he or she will be happy to supply you with names.
• Ensure you know the company’s policy on credit limits, cost reviews, refactoring charges and recourse periods.
• Question carefully the cost of the package and be prepared to make comparisons with alternative methods of funding and with other factoring companies.
• If you export, or intend to export, make sure that export clients can be included in the factoring arrangement.
• Consider whether you are comfortable working with a factor that is a subsidiary of your clearing bank if this is the case. Many businesses prefer to keep the two lenders separate.
• Is the factoring company able to offer on-line access to your account? (And is this important to you?).
• If on-line access is essential, does the facility allow you down-load invoices or schedules or is it limited to viewing the account?
• How long is the contact being offered (can be anything from 6 months to two years) and what are the costs of early termination?

Needless to say Funding4Business have extensive experience of the potential hidden pitfalls involved in negotiating factoring agreements. Contact us for a free review.