Case Study 4 – factoring case history – low credit limits means low funding
Factoring Case History
Factoring Solutions received three enquiries in the same month from companies all unhappy with their existing factoring arrangements.
Unfortunately the problems that the company were having with their factors resulted in cash flow problems caused by their factoring company’s inflexibility or substandard performance.
The first of the three companies had a turnover of £7.5m but only 35% of the sales were domestic with the balance of the business being overseas and the company had a facility with one of the larger independents.
Their main complaint was that funding was being restricted due to unrealistic credit limits being imposed on their customers, including one of £10,000 on a UK high street bank. By this means the factoring company were able to quote a facility of 80% but in actual fact the average funding had been restricted to under 60% of the total debts by using fairly commonplace but artificial funding restrictions.
It had come to the stage where this profitable company had to reign in their sales and marketing efforts as they couldn’t afford to fund any more expansion, which was exactly the reason that they entered into a factoring arrangement in the first place
Fortunately the company contacted ourselves and we were able to introduce them to a factor that didn’t operate with ridiculous limits but who undertook to fund every account as there are invoice finance companies around who not claim to offer a “what you see is what you get” policy with complete transparency but actually achieve it too.
By switching factoring companies they not only released an additional £185,000 into their bank account but did so at cheaper rates too.
If any company is unhappy with their existing factoring arrangements or think that they can be improved for an informal, friendly chat with an expert, please contact Factoring Solutions NOW on 01827 707680