Is Using an Introducer a waste of time?
Every business is different and each will have their own requirements. Although financial providers may initially appear the same, there are big differences in the types of business they prefer to support, the products they offer and the service they can offer. Findmeafactor's expertise is being able to identify exactly the type of factoring company that will be able to meet your expectations. It is unlikely you will have the time to analyse all the quotations you receive and read through all the small print. An incorrect choice could be costly in the long run.
Are Bank Ovedrafts cheaper and quicker to arrange?
When Banks offer an overdraft they look at the net worth of your business and they lend in multiples of that figure, this is called gearing. In addition they place tight contstraints on the borrower, these are called covenants. Remember if your business is growing quickly the Bank may consider that you are overtrading and may not be prepared to increase the overdraft to match the increase in trading. Many banks may also seek security by way of a charge over the business owners private property. Factoring companies are very much more focused on your customer base and not your balance sheet. As your business grows the factoring facility will grow in order that your business has sufficient working capital to match your growth.
Is it best to go for the cheapest quote?
Price is of course a very important part of any proposal and it is easy to be influenced by a low quotation. It may be low but you must always consider, if the overall facility is going to give your business what you need. Most people are focussed on the advance, the factoring charge and the discount charge (commonly known as, the interest rate). There are often other charges and it is important that ALL charges are set out at the inception of the facility. Many factoring companies have hidden charges which only come out in the course of time. Findmeafactor are experts in this field, and are better placed to establish all potential charges for you to consider before entering into an agreement.
Don't all New Prospects get Charged the Same Rate?
Certainly not. each proposal is different and will command different rates.The following will influence the rates to be charged:- Projected Sales Number of active customers Customer spread and credit rating of customers Workload Business sector Financial standing of the prospect Reputation and credit rating of the business owners.
Findmeafactor will ensure that the best possible proposal is presented to an appropriate factoring company, highlighting your strengths and dealing in a positive way with any potential difficult areas or past history.
Will I have to give a personal guarantee?
Sadly the biggest risk a factoring company will face is fraud and they need to protect themselves from such risks. Factoring companies normally require the following documents to be signed by the directors of the business. A Personal Guarantee and a Warranty. By signing a personal guarantee the guarantor agrees to pay a sum of money to the factoring company should they fail to recover the money they advanced against the invoices that they were financing. This is a powerfull document and means that the guarantor is liable for any loss that the factor may incur. A Warranty is a document whereby you agree to conduct the facility correctly and should the factor suffer a loss as a result of a breach, such as raising a false invoice or failing to pass money to the factor you will then be liable for any loss as a result of such an action.
Factoring companies often feel that a guarantee will help focus the mind of directors should a business fail. The factor will want the directors to assist in the orderly recovery of collecting money from the customers . Factoring companies will often be prepared to accept a limited guarantee, ie rather than guarantee the whole sum advanced they will accept a pre-agreed figure.
Do Factoring Companies Lock you into Minimum Periods?
Most business owners want a feeling of security so factoring companies do offer 12 month contracts. This is no bad thing as bank overdrafts are what are known as 'on demand ' facilities which means that the bank can also withdraw a facility at any time.
Factoring companies are quite flexible and will often offer shorter periods, however the 12 month contract is usually good for both parties.
Isn't this sort of finanance only available to larger businesses?
No. A whole range of businesses use factoring. There are many factoring companies who are happy to deal with businesses with annual sales of £50,000 or less there are also many others who will only deal with businesses with larger minimum turnovers.
Don't Factoring Companies not like people or businesses with bad credit history?
The factoring industry is very open minded and will look at businesses and businessmen who have had difficulties in the past. It is better to tell the factoring company at the outset of any past problems as they will inevitably find out themselves when they make their own credit enquiries. However, remember that factoring companies are keen to protect themselves from fraud and will be highly reluctant to deal with anyone who has been involved in fraudulent activity.
Will my customers think I am in trouble if they find out I am using a factoring company?
Factoring has grown enourmously over the last few years and is rapidly becoming the most practical way to finance the working capital needs of most companies. Any business looking at their supplier list will often see that a number of their suppliers use the services of a factoring company themselves, so it often does not come as any surprise to customers when their supplier asks them to pay a third party factoring company.
If you have any other questions please contact us