Discussion
insurance_jon said:
they bankrupted my mate. They took on the debt then, decided they didn't like it and gave it back
Interesting. Most factoring companies will stipulate precisely what debt they will take, what they won't, and so on. In addition there are various types of arrangement - recourse (if the debtor doesn't pay you get the debt back), non-recourse (they insure the debt for you), and so on.I've had factoring or invoice discounting services of one sort or another for eight years and never had a problem - but I did make sure I understood what was in the agreement!
I have benchmarked my providers against Bibby in the past and, frankly, didn't see any compelling reason to go with Bibby, so I didn't.
Whatever you do, get multiple quotes from multiple people. And consider getting credit insurance from other suppliers than the factors, too, to see how it compares. Think about whether you want them to do any credit control for you - most are very poor at it, to be honest, but they'll want to charge you for the trouble whether you like it or not.
If you're still at the stage of getting quotes, may I suggest you speak to Leumi ABL who are well-funded and very keen to expand. I don't get anything for saying that, but I am a customer, and they are quite likeable (for bankers...).
It is also worth seeing if your existing bank offer a factoring / discounting service, since your Business Manager will probably earn a commission for introducing you, so perhaps will be keen to try to make the deal stick.
Do you mind if I ask what business you're in?
One last thought - for each supplier you're considering, give them a list of your key accounts and ask them for what credit limit they would give. That can be very illuminating, and can throw up potential problems at an early stage.
Happy to advise further if you like, just not specifically about Bibby!
m30dus said:
insurance_jon said:
they bankrupted my mate. They took on the debt then, decided they didn't like it and gave it back
I know of a similar case involving said company. Make sure you look at all the options.Are you talking about "changing their mind" or are you talking about "they took on the debts, the debtors didn't pay, the debt was recoursed back to the vendor, who ran out of cash" or something else? Looking at the sorts of agreements I have with my asset-based lenders, I cannot see where the wiggle room is to allow them to "bankrupt" me.
wattsm666 said:
They have just withdrawn a faclity with one of our clients, by email. Didn't even phone, all down to the sector and no longer being able to insure the debt.
Yes, everything is in the lap of the credit insurers right now, indeed. Ironically I'd be quite happy with such a thing by email - in my experience, the problem is getting everybody to put anything in writing so you know where you stand - but I realise I'm not like the rest of the world 
Unfortunately in business there's always a catch with credit. Factoring / discounting is only available whilst the insurance is there (if you insure) or the sentiment is positive (if you don't). Overdrafts can be - and are - pulled at any time.
It is hard for smaller businesses. Once you get big enough, other options exist, such as guaranteed overdrafts, revolving credit facilities, even bond issues.
The issue of asset-based lending / factoring / discounting seems to have been completely ignored by the government. Are there "guarantees" going to apply to, say, factoring facilities? If not that seems like an opportunity well and truly missed.
Also very interested in this thread. What quotes or charges are your guys receiving for invoice discounting?
Round numbers for example £1-2million turnover was one I was shown:
0.45% fee and/or £750/month minimum charge.
Is this any good, is there a huge difference between some companies, I have no idea?
Round numbers for example £1-2million turnover was one I was shown:
0.45% fee and/or £750/month minimum charge.
Is this any good, is there a huge difference between some companies, I have no idea?
I use Close Invoice Finance (part of Close Bros merchant bank) and they are fantastic. Flexible and cost effective. In 9 years I have had only one change of account manager and one change of credit controller (the actual person who chases & collects the money in from our customers)
If anyone would like an introduction just email me through here.
Full factoring or Invoice Discounting up to 95% drawdown.
If anyone would like an introduction just email me through here.
Full factoring or Invoice Discounting up to 95% drawdown.
insurance_jon said:
In my friends case he was a sky installer (40 teams out every day), and 4 months into the factoring deal the main contractor went bust. Bibbys insisted he must have known and pulled the plug, and then wound him up.
So they were arguing that he should have known that the main contractor was in trouble, i.e. that he did not behave as a prudent giver of credit would have done, and just relied upon the credit insurance cover being provided by/through Bibby? Or did he not insure his debt?So they've recoursed the invoices already factored back to him, which has stopped his cashflow and left him with a debt which he can't pay, hence wound up.
This is a danger with factoring, certainly. If you didn't factor, and the client went bust, you'd not receive the money you were owed. If you are factored, and the client goes bust, you might have to pay back money you've already had (and, err, spent).
The devil, as ever, is in the detail which of course we don't know in this case. Was the debt insured or not? What precisely did Bibby suggest this person had / had not done? And so on.
We obviously don't know. What it does point out - for the OP and others - is that there is a lot of detail that you need to understand and keep on top of in order for factoring to work successfully even when things go wrong. For small businesses, that often means yet more time away from "the coal face" understanding such things, but it is imperative that one does so.
gazm said:
skwdenyer said:
Do you mind if I ask what business you're in?
I'm invloved in the Television industry, specifically post production (the technology and editing end)Cheers
I think I suggested Leumi ABL, who I deal with at the moment. There are others - Close have been chasing my business for years, which is always nice, whereas Barclays Factors (I bank with Barclays) only bothered to get in touch when kicked by my business manager (who would have earned a commission if I'd taken them up).
The really important thing is to read everything that they send you, and stick to the letter of it. If, for instance, you're late notifying them of an overdue debt, the insurers can pull cover for that debt, which isn't helpful. And you absolutely cannot rely upon any of these guys' credit control as a complete credit control solution, despite having to pay for it. Oh and, of course, make sure you have robust retention of title clauses in your terms of business
I can't tell you what rates we have from Leumi ABL (there's a confidentiality clause in the contract), but they were very competitive, for us at least. In our case they're funding 90% including VAT; there is an excess of £1k on our credit insurance.
Good luck with it all!
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