The good news is that there are a number of factoring companies are prepared to look at difficult cases provided they can be satisfied that their funding will be secure and offer the troubled business a way forward.
The following can raise concerns to lenders
Most factoring companies prefer a spread of customers but some will look at single customer situations subject to the credit rating of the customer and the type of product being sold. Whilst it is not ideal to have all your eggs in one basket this situation often arises in the early stages of a company’s life.
A company that has suffered cash flow issues may have been sued by suppliers and have judgements registered against it and these judgements are in the public domain and often make it difficult to gain credit from suppliers and funding from finance companies. The company would need to demonstrate that the new factoring will provide additional cash flow to settle these judgements and ensure that future suppliers are paid in an orderly
Poorly Managed Ledger
Ideally most of the ledger should be current and within terms. Most company owners are focused on sales and credit control is often done on an ad hoc basis, ie customers are chased when money is needed as opposed to being a pro active exercise. A number of factoring companies will look at these situations and by offering a professional credit management service they can improve a ledger and in turn improve cash flow.
Whilst the above situations can be placed the terms offered by factoring companies are not cheap and may have additional terms to protect them. Ideally a company should aim to improve their trading profile and move to a factoring company who can offer better terms.
The factoring sector is so diverse and dynamic a home can be found for virtually every proposal. We at FindmeaFactor have relationships with a large number of factoring companies and have placed difficult situations in the last 12 months.