Case Study 17 – factoring and credit insurance through the same company

Factoring and Credit Insurance with the Same Company isn’t Always the ideal Solution
We were approached by a company with 80% of it’s £7.5m annual turnover to one customer.

Whilst all factoring companies like to see a spread of customers there are some that will consider what is ostensibly a single debtor situation, subject to the type of business of the company and the creditworthiness of the customer but due to the size of the debt in this instance the factoring company would most likely insist that the debt be insured.

The customer is part of a huge global manufacturing group that has not had the finest of times in recent years and the company approached one of the major independent factoring companies who are always promoting themselves as innovative solutions providers and “more flexible than the competition” but who declined to offer a facility to this company as they were unable to arrange the necessary insurance, cover telling the company that the debt was uninsurable.We don’t claim to be credit insurance experts which is why we have a relationship with a firm of specialist who are and having contacted them to see exactly why credit insurance was unavailable on this particular company it took them just half an hour to come back with offers of £1m plus credit insurance lines from two of the major credit insurance companies.

To make life easier we ventured to approach the original factoring company again, telling them that we had been able to arrange the necessary insurance cover asking them to review their decision with the benefit of this insurance policy assigned to them  but unfortunately although claiming to be more flexible than the competition in truth they were the exact opposite and were actually tied to one particular credit insurance company and therefore at the mercy of their underwriting so they turned down our suggestion that they could offer a factoring facility in conjunction with a credit insurance policy underwritten by another insurance company as it was against their rules.

Fortunately some factoring companies don’t just pay lip service to flexibility but actually look for ways in which to structure deals and in this instance we were able to source a factoring company that weren’t quite as restrictive in their practices and despite having a similar tie up with the same insurance company (who would have refused the credit risk yet again) the second factoring company were flexible enough to be able to offer them the necessary funding facility in conjunction with a credit insurance policy arranged through our insurance broking contact.

When the company asked us how we were able to arrange credit insurance cover when the first factoring company said that the debt was uninsurable our response was that “we looked harder.”

 

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