factoring case histories from Factoring Solutions

Amongst the factoring enquiries recently received was one from a company who had decided that factoring was the route that they wished to take to finance their expansion plans and they wished to proceed quickly. The factoring company that we introduced them to visited them three working days before the end of the month and the facility was signed, sealed and setup by the last day of the same month. A different enquiry from a new start company received on a Friday night said that they had got every aspect of the new business in place except the funding and asked whether we could move quickly. The factoring company were on his doorstep on the following Monday morning and confirmed their offer by fax later on that day.

Another new start company in the Midlands approached us saying that they wished to buy container loads of British washing powder overseas and resell to a UK distributor but needed help with the financing. As the credit standing of the customer was good we were able to introduce the company to a finance company that were able to offer trade finance to import the goods together with a single debtor factoring facility.

Looking at a different aspect we were approached by a company involved in the construction industry with severe cash flow problems and needing to raise funding from the £60,000 outstanding debts. Although not the easiest or glamorous of deals, we introduced one of the more flexible factors who had a close look at the business and found that the outstanding debts were full of disputes and retentions and that only £15,000 of the total was factorable. As it seemed clear that this company was insolvent due to the huge amount of outstanding trade creditors and that the clean debts of £15,000 wouldn't provide sufficient funding to save the company, the factor declined to offer a facility. We were somewhat shocked a couple of weeks later to hear that this company had been offered a facility by one of the high street bank factoring companies. The level of funds provided will be insufficient to stave off action by the creditors and the additional burden of factoring costs will just serve to hasten the demise of this company. Caveat emptor.

Factoring should be straightforward but in reality it isn't and as we have very real concerns with the way that some factoring companies operate we have set out brief details of the possible pitfalls in the following pages including such matters as "Why some factors appoint Receivers to their clients" and "How some factors abuse the Minimum Annual Fee" to "Why some factors offer such a poor service."

Please see next page for details on selecting the factoring company