factoring case history - low credit limits means low funding.

Factoring Solutions received three enquiries in the same month recently from companies all unhappy with their existing factoring arrangements. Inevitably this means that the company is suffering 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 with 65% of the business overseas and they had a facility with one of the larger independents. The 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 artificially restricted to under 60% of the total debts. 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.
 
 We were able to introduce this company to a factor that didn't operate with ridiculous limits but who undertook to fund every account. By switching factors the company not only released an additional £185,000 into their bank account but did so at cheaper rates too.

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.