factoring for construction industry - case history
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 factoring 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.
Postscript - As expected this company didn't continue trading for much longer.
Factoring
Factoring is now considered to be mainstream lending and has replaced the traditional bank overdraft in many cases but unlike other forms of funding, factoring includes a large element of service and whilst one might think that all factors are the same the truth is very different with many of the major players offering a very poor quality of service that is as likely to hold back their clients' growth as it would advance it.
As we have some very real concerns about the way some of the well known factoring companies operate we have set out some of the pitfalls including details on selecting the factoring company and why the cheapest factoring quote often works out more expensive in practice.
Invoice Discounting
Invoice discounting is currently being used by almost 14,000 companies generating combined turnovers of nearly £115 billion and it is this method of invoice finance that is experiencing the most growth at the moment. Our reservations about the activities of some invoice discounters are as valid as in factoring and we would be grateful if you could click on the link to see our areas of concern about invoice discounting
Trade Finance
Trade Finance is an area of business funding that co-exists alongside bank overdrafts, factoring and invoice discounting providing specialist finance to facilitate trade and you can read more about the types of facilities that we can arrange by clicking on the link for trade finance pages
.