Factoring companies and funding issues

Factoring companies claim that they will fund up to 85% of sales invoices and whilst that may be true for some established recruitment companies there are few others that will manage to obtain such a generous facility in the current economic climate.

Unfortunately many of these factoring and invoice discounting companies whilst claiming to offer a high advance rate will use a variety of excuses to keep the actual funding levels as low as possible. The commonest route is by setting low credit limits on customers and refusing to fund in excess of these limits followed by imposing strict concentration limits and restricting the funding on customers with outstanding balances in excess of 25% of the total outstanding debts irrespective of the creditworthiness of the customer.

factoring and the wrong waySome of the credit limits set would be laughable if it weren’t for the fact that they are causing problems for the factoring companies client. Of the many companies who have approached us as they weren’t satisfied with the funding provided by their existing factoring company the two that stand out are a company who was given a credit limit of £10,000 maximum on a bank, which just happened to be the factoring company’s parent and another who’s factor wouldn’t budge from the £20,000 limit on Essex County Council.

Many factoring brokers claim to have relationships with 50 or more factoring companies whereas we claim the exact opposite as we refuse to deal with the great majority of factoring companies as they don’t meet our high standards.