Tuesday, 31 January 2012

Invoice Discounting and Factoring. All providers are not the same

It is a common misconception that all Invoice Discounters and Factors are the same and that it really does not matter who you use for and it is OK just to use the first one that says yes or to always use the one that you already know. On the odd occasion this might work, but more often than not you will not be getting the best deal.
You have to know the market. You need to get comparisons from a carefully selected 5 or 6 providers, you have to put them in competition with each other and you have to know all the difficult and important questions to ask them and most importantly you have to know their hotspots, the deals that they really want to do and so offer their best terms. You also need to understand why you should avoid using the client’s own Bank for this type of funding.
There are over 50+ providers of invoice discounting and factoring. These include the ones that will do very small deals, and those that will do very large deals and those that will allow you to only finance one single invoice. They also include ones that just have a 7 days cancellation clause and others that have a one month cancelation clause. Those that will do IT companies and specialists that only cater for the care home industry and the panel beating market place. The most important ones to know are those that are willing to do the unusual, the non standard and even those that will do the contractual type deals that are normally off limits. There is now a company that lets you auction your invoices to the highest bidder.
The moral of this story is that it is very easy to arrange a bad invoice discounting or factoring contract for your company. It is much harder to arrange one that comprises both good value and reasonable terms and conditions. Remember everything is negotiable if you know the market place. Do not just take the first deal that comes along. Create competition.
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