How do I arrange a factoring facility?

The first port of call should always be your accountant who will work with a variety of different providers and who should be impartial when it comes to whom they place business with.

Once an initial meeting has been arranged a funder will typically wish to see a detailed set of financial forecasts with a monthly profit and loss account, cash flow and balance sheet including all costs and dynamics associated with the potential funding.

This should be flexible for certain drivers such as debtor collection terms and sales assumptions for example and your accountant should have the expertise to prepare this with you.

Who are the main providers of factoring and what are the costs?

Many of the high street banks offer asset backed funding solutions such as invoice discounting and factoring along with many independent and national specialists.

A meeting with your accountant should be enough to work out who may be the best match for your business and quotes should be obtained from at least two providers in the market.

A meeting with your accountant should be enough to work out who may be the best match for your business and quotes should be obtained from at least two providers in the market.

Charges come in different guises with the most common being interest on the outstanding balance (typically between 1.5% and 3% over base) and fees based on the value of sales processed through the facility (often in the range of 0.5% to 3%).

Other transaction charges can also be levied and on the face of it two comparable quotations can appear quite different at the outset.

Once quotes are received, it is advisable to get your accountant to run over them to work out the cheapest option for you.

More on factoring…

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