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• 25 Jul

  An Example Of Factoring Pricing For A Temporary Staff Agency.

  This is another example of a price that we recently found for a temporary staff agency that were looking for recourse factoring.

  Factoring For Recruitment

  Factoring will provide them with both advances against their sales invoices, when they raise them, and a credit control service from the factoring company. This is often popular with temporary recruitment companies, as it frees up their time - away from chasing invoices towards making placements and finding new clients.

  In this case, as recruitment is a staple within the factoring sector, prepayments of 90% were available against sales invoices raised on credit terms. This means that the majority of invoice values are unlocked immediately, with the balance recouped by our client (less charges) once the invoice is paid by the customer.

  In this case the recruiter was projecting annual turnover of £4.5M + VAT, so a reasonable sized business, hence the rates needed to reflect that.

  Example Price Of Factoring For This Temporary Staff Agency

  We found them the following price quote for recourse factoring:

  • Service charge: 0.4% of invoice value, subject to a minimum charge of £1,250 per month. The minimum fee is put in place by the factoring company to ensure that the client achieves something near to their projected turnover.
    
    
  • Discount fee: 2.5% over base rate.

  Working Out The Costs And The Amount Of Funding

  So for an example invoice valued at say £30,000, that was outstanding for 30 days until paid, the funding and fees would work out as follows:

  • Funding at 90% against the £30K invoice could release up to £27K of available funds immediately the invoice is submitted. The balance (less charges) is passed to the client when their debtor pays the invoice.
    
    
  • Service charge: a £30,000 invoice factored at 0.4% = £120 (+ VAT if applicable).
    
    
  • Discount charge (assuming 0.75% base rate & 365 days per year): on funds in use of £27K for 30 days = (((27000 x 3.25%) / 365) x 30) = £72.12.
    
    
  • Combined that makes £192.19 to access £27K of funding for 30 days.
  • That works out at c. £7.19 per £1K of funding, per month - including the outsourced credit control service.

  • The combined service charge and discount fee equate to just 3.325% of that invoice value (assuming the minimum fee is exceeded).

  By Glenn Blackman