Lloyds TSB Corp Finance - Factoring

[S1M VP]

Anyone use ltsb recruitment factoring services?
Have 2 offers from Oriel & Lloyds which are somewhat similar.
Basically buy invoices, provide 100% (not normal 80-90%) and charge 4% but they collect the money in
Any good/bad experiences?

[lenientism]

If we have to buy invoice, basically we use our own money, what benefit they can offer? It looks similar with a bank offered me credit card with saving warranty attached that I have to save money in their bank for the some amount of the credit card limit, I'd prefer look for another card elsewhere.

[DavidY]

Remember the 4% will be from the total invoice value inc VAT so is more like 5% off your bottom line profit for the service.

IME Factoring is ok if you have an exit strategy from factoring/invoice discounting in your business plan, it's good for periods of rapid growth, but you do really need to plan on how you get out of it.

If you business is liable to decline for a period (today's unpredictable market) I'd be very wary as you just end up using the money for day to day business expenses, and if you have a couple of bad months, you suddenly have very little available to draw down (especially if you'd be drawing down at 100%!!!). Let alone the worry about a disputed invoice which the factorer will willingly throw back at you, reducing your available funds in a stroke.

If you set some simple rules, ie never draw down more than x% of the available factored funds until invoices are actually paid, then you should be ok. Keep a close watch on Debtors/Amount drawn down and creditors, watch out for borrowing too much future profit.

It all depends on your buiness model.

davidy