How Much do Factoring Companies Charge?

factoringFactoring is one of the easiest and most effective ways of accessing finance for your business. However, even though it is more and more difficult to access more conventional types of finance through institutions such as banks, many companies still have not considered factoring as the answer to their cashflow worries and business growth plans.

One of the sticking points is often not understanding how factoring companies charge for their services. This is understandable but the fact is factoring is a really easy process and everything is very transparent and clear once you understand what is going on.

The factoring fee

Factoring companies charge for their services with their factoring fee. This is a % of the amount of invoices that you require factored. The exact rate of the factoring fee depends upon a number of things:

● The industry you are in – Some industries are generally more creditworthy than other which can lead to some industries getting preferential factoring rates.
● The volume of invoices you require factoring – The more invoices you require factoring, the lesser the fee you will generally pay.
● The factoring company you use – Different factoring companies have a range of different factoring charges.
● The terms of your invoice – The length of time your customers have to pay will affect the rate you are charged.
● How creditworthy your customers are – The better their credit rating, the better the overall fee.

percentageAs a guide the typical SME may be looking at a service fee of between 0.5% and 2.5% of factored invoices plus interest on the funds advanced at something like 2.5% to 3% over Base Rate. To get the very best terms for your factoring though, you should really use the services of a factoring broker as you’ll get the best terms for your business and won’t pay anything extra.

The reserve amount

Something that many people don’t understand about factoring is the reserve amount. When an invoice is factored, your business receives a % of that invoice straight away, let’s say in this instance it is 90%. The remaining 10% is kept as a reserve to cover factoring fees and as a buffer against any bad debts. Once the invoice is paid by your client to the factoring company, this, minus the factoring fee is returned to you.

Are there any other fees involved?

There can be, which is why it is wise to use a broker who can navigate you through the different options available. Some companies charge an application fee for example and some may charge for bank transfers and other things. Sometimes there can be so many factors and fees to consider, it can be difficult to pinpoint which is exactly the best deal for you which is why it is essential to take expert advice to get the best deal possible for your company.

If you would like to know more about factoring and how it could help your business then don’t hesitate to contact Factoring Solutions for a free, no obligation chat on 01827 707680

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Ways To Avoid Cash Flow Problems In Business

One of the major mistakes that businesses make is to forget that profit is not the same as cash flow A business may generate a profit margin on paper and the business may be growing, but if all of the company’s money ends up getting tied up in stock or they end up unable to pay their payroll because they’re waiting for invoices to be paid, that profit means nothing. Cash Flow problems can kill even the most profitable of businesses.

Here are some simple ways to keep your cashflow in check and ensure your business’s finances stay strong and healthy.

Keep a cashflow forecast

You may have done a cashflow forecast when you first did a business plan when forming your company but many business owners fail to keep up with it. Setting cash flow targets for the next 12 months can really help you stay on top of your finances and help you to avoid any shortfalls by helping you to business plan effectively.

Stay on top of your credit control

Sometimes it can be difficult to find the time to stay on top of your invoicing and credit control and this can mean that payment terms can slip from some of your customers. Ensure you know your customer payment dates and keep on top of them if they don’t pay on time. It pays not just for your cash flow but in terms of good corporate governance. The fact is that a company that starts to pay late on a regular basis may be experiencing financial difficulties and could go bust.

Manage your stock

Having too much stock can really help to kill your business. Keeping on top of your stock management will help you to avoid poor purchasing decision and also have a positive impact on your cash flow, ensuring that you never hold too much stock and have all your money tied up.

Keep a track of your outgoings

When was the last time that you had a really good look at your outgoings? Over time, businesses can pick up a significant amount of outgoings that they may no longer need, such as subscriptions for IT products they no longer use. Going over your outgoings with a fine tooth comb will almost certainly find yourself saving a significant amount of money every month.

Access finance

Finance can be tough to access for small businesses and for some new businesses, almost impossible to get from the conventional lenders such as banks. This can sometimes lead to some small businesses having no lines of credit available to them to which they can turn when a big order comes in demanding longer than normal credit terms. However, whilst it is difficult for small business to get finance from conventional lenders thanks to a lack of credit history, other forms of finance are available. Factoring, where you in effect ‘sell’ your invoices to a factoring company and obtain instant access of up to 90% of their value where the factor credit checks the customer, not the small business. That means that if your customers are creditworthy, so are you.

Don’t let cash flow problems ruin your business. Follow our advice above and keep on top of it and let your business grow and flourish. If you would like to discuss more about keeping your cash flow healthy by utilising factoring then call us on 01827 707680 for a free, no obligation friendly chat.

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Factoring Solutions wins prestigious award

Factoring Solutions is pleased to announce that have been awarded “Finest in Specialised Factoring Brokerage” which is an exclusive award from Corporate Vision who launched “The European Business Awards to shine a spotlight on the ongoing work of companies of all sizes and within all sectors across the UK and Europe.”

Corporate Vision stated that the award was made due to the work of Factoring Solutions in the finance sector being considered as exemplary

Factoring Solutions wins prestigious award

Quoting from Corporate Vision’s website:-

We’re fiercely passionate about recognising outstanding achievement, game-changing innovation and stellar performance, and all of our awards are carefully tailored to provide detailed and in-depth analysis of the very best each market, industry, sector and region has to offer.

We take choosing our winners very seriously and every single one is chosen on merit. As we said, we’re only interested in recognising the very best so, no matter how big a business is, nobody can buy their way to success

Our winners are decided by a combination of votes gathered from our network of respected industry partners and our own rigorous in-house research, performed by our dedicated network of industry insiders and corporate specialists.

Each award is carefully scrutinised, from a nominee’s region to their performance over the past 12 months, their commitment to innovation, their methods and even their competition to ensure that only the most deserving firms walk away with one of our prestigious trophies.

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Want To Start A Recruitment Agency? 3 Questions You Need to Ask Yourself

We work with a multitude of new recruitment startups every year. Thankfully, most of these are started by former consultants who really understand the recruitment business as well as having a good knowledge of how their business is going to be funded and ran. Too many people though see recruitment as an easy way to make money, an easy business to set up and run. However, they soon realise that they are entering one of the most ferociously competitive industries in UK business. So if you’re considering setting up a recruitment agency, here are three questions you need to ask yourself.

Do you have experience in recruitment?

Some people think that recruitment is simply placing really good candidates into really good companies. It can look quite a simple process from the outside but this forgets what is going on in the background. There is a myriad of employment legislation to deal with as well as other administrative issues. This is on top of the recruitment itself, which is often compared to ‘spinning plates’ in that it’s all about multitasking and prioritising. Can you handle having all these going on in the same day?

● Business development calls
● Client visits
● Searching for candidates
● Screening CVs
● Checking references
● Checking right to work in the UK
● Arranging interviews
● Interviewing candidates
● Following up with clients
● Following up with candidates

These are just some of the duties most recruiters will do all or many of every day.

Permanent recruitment or temporary recruitment?

Do you know the difference? Basically, permanent recruitment is where you provide and place a candidate to a company for a fee, usually between 15% and 20% of the candidate’s yearly salary. Temporary recruitment is where you the agency provide a company with an employee and you charge the company for this on an agreed basis. You the company in the meantime have to pay the candidate’s salary. The difference is clear but many new to the industry don’t understand the difference it can have on your finances and cashflow.

Have you got finance in place?

As well as the startup cash for your initial business startup costs and marketing, do you have the finance in place for the actual running of your business? Whether you are a permanent or temp recruiter, you’re going to need some form of finance in place to ensure that you business can operate efficiently and effectively. It’s particularly important if you intend to provide temporary recruitment services.

With temp recruitment, you as the agency provide and pay the candidates for the duration of the placement, invoicing the company on a monthly basis. If they are on 30 or 60 day terms and you have several candidates with the company, you have to pay those salaries for weeks or even months before you even get paid.

Do you have the backup finance to fund your recruitment startup? If not, it’s worth looking into factoring and invoice finance or even a full recruitment finance package to include back office and payroll functions as this can ease the financial burden. There are naturally costs associated with these but they can let you access up to 90% of your invoices’ value immediately and can seriously ease your cash flow worries.

If you are looking at starting a recruitment company, it is crucial that you understand and have access to sufficient finance. For a free no obligation chat about factoring and other forms of finance, then call us on 01827 707680.

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How Does Factoring Affect Cashflow and Cash Management?

Life is tough for small businesses in the UK. The current financial climate means that small businesses are struggling more than ever before to access enough finances to help their businesses grow and flourish. It is especially frustrating for businesses who are doing well, who are creating work and who do have the capacity to grow but have to turn away work just because they cannot afford to offer suitable credit terms. Unfortunately, in the current business climate, many large businesses are happy to work with small and medium enterprises but only on their terms, which means they may have to wait 30, 60 or even 90 days for payment. This can place and untenable strain on a small business’s finances and stunt their growth and even put them out of business if their cash flow problems get so bad.

Cash Flow Problems Are Created By Slow Payments

Customers who pay quickly are a blessing for small companies. However, when their customers are on longer terms, it means that unless careful cash management is in place, small companies can risk not being able to replenish stock, buy or repair equipment or even meet their payroll liabilities. Small companies can often be placed in serious dilemmas when they land a large sale that requires longer terms.

● Do they take the sale and risk working capital issues?
● Do they turn away the sale and risk losing future business?

It’s a fundamental problem for a lot of small businesses but there are three options available:

1. Turn away the sale and avoid growing

This is perhaps the most conservative option and whilst it will prevent your business having cash flow problems, is it really healthy for a business to turn away big sales and to avoid growth? Do you think they’ll ever bother coming back to you if you’ve turned them away once?

2. Ask the clients to pay quicker

If the client wants to pay on 60 day terms but it would be much more advantageous to your cashflow to have them on 30 days, then you can always ask. But what is the likelihood of them agreeing? And would such a question lead them to question the financial health of your business? A risky strategy and one that in many situations is unlikely to succeed.

3. Use factoring to ease your cashflow struggles

Factoring is used by businesses across the UK to ease their cash flow worries and it is perfect for the situations illustrated above. It’s great for small businesses and especially for those that may not have access to credit through more traditional means such as banks. This is because unlike a bank loan which requires a stringent credit check on your business, with factoring it is the strength and spread of your customers that is of primary importance.

Being able to access a large percentage of your customer’s invoice immediately means that no longer do you have to turn away large orders and you are free to grow your business.

If you would like to know more about how factoring can help your business then call us on 01827 707680 for a free, no obligation chat.

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Is Factoring Suitable For Startups?

Business finance for startups can be scarce which means even if your company is trading successfully, it can be difficult for you to grow your business. There is hope out there however for startups and that is thanks to a method of business finance known as factoring. Read on below to see just how factoring could be the boost that your business needs to grow.

What is factoring?

Put simply, factoring is where your company sells its invoice for a percentage of the debt owed. Receiving up to 95% of your invoice immediately gives your business an immediate cash injection instead of having to wait 30/60 or even 90 days for your money. The factoring company then collects the full amount from your customer. You are charged a fee for using the factoring services.

Is my company able to access factoring finance?

If you can answer YES to most of the following questions then factoring could well be a good idea for your startup:

● Are you a startup that is struggling to access sources of funding from regular sources such as banks?
● Does your business’s cashflow struggle sometimes thanks to a long sales cycle which means you compnay has to wait 30, 60 or even 90 days to receive payment?
● Are you finding some of your customers are really slow players and that this is really hampering your growth plans?
● Do you sometimes find yourself struggling to find up-front money for raw materials, equipment and other payments?
● Do you wish to avoid ladening your business with additional debt by taking out a loan?
● Have you exhausted all other finance routes?
● Do you have customers with good credit ratings?

Of course there are other factors to consider such as realising that there is a cost for factoring and this means that you will not receive the full amount of your invoice but that cost is normally the equivalent of the early settlement discount that many companies offer. Other things to consider are the fact that you will have no ‘book debts’ available as security if you’re trying to access other sources of finances and your customers will know you are factoring too because the factoring company will be collecting the money from them although this is no longer seen as a negative.

Should we go direct or through a factoring broker?

You have two options to access finance through factoring. Firstly, you can go direct to one of the many factoring companies that are in the marketplace. Secondly, you can go through a specialist factoring broker. The latter is almost always the savviest decision as there are a wide range of factoring companies that all offer slightly different terms conditions and processes. It’s vital that to get the best deal for your business you get specialist advice to guide you through the myriad of options. Best of all, you’ll pay no more than going direct.

As a startup business, it’s wise to get all the advice you can on all aspects of your business. To get free, independent and no obligation advice about factoring and how it could help your business then don’t hesitate to contact Factoring Solutions on 01827 707680.

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