- 28 Jan
Has Your Factoring Facility Been Reduced?
Worrying comment on one of my posts, about bad factoring service, from a colleague at one of our funding partners. They have apparently been approached by an advisor whose client has had their factoring facility reduced 25%, by the factoring company that the client is currently using.
Differences In Factoring Company Risk Policies
It may be a one off change to a single client's facility, however the comment mentioned that the change was due to a change in the factoring company's risk policy. The risk policy (not always formally written down by all factors but will be by most) is a set of guidelines, or rules (normally not published externally), which sets out the factor's approach to lending. It may specify certain industry sectors they will, or won't handle, or indeed the level of prepayments that they will offer certain industry sectors. In some factors, the policy is considerably more complicated and sets out how their clients are managed and how risk is handled at every stage of the credit process.
If this instance is evidence of a broader change by one of the factors, that could affect a larger number of clients, this could be the first of a number of customers in similar situations.
Read more information about: How Funders Calculate Funding Levels & Prices
What To Do If Your Facility Is Reduced
If your factoring company tells you that they are going to reduce your facility, don't panic, there are options available to you. The good news is that "risk policy" varies significantly between factors, and at the time of writing there were almost 100 different providers in the UK. One provider may not accept particular sectors e.g. construction companies, whereas another funder my be actively targetting that sector. Prepayment levels also vary in a similar way.
So if you get the bad news from your provider, please contact Sean on 03330 113622 and we will not charge you to search the market for better terms, and a better deal to meet your needs. We have been able to find funding for 97% of businesses that have contacted us, and we have also averaged cost savings of 31% (updated October 2019) for our invoice finance clients that are seeking a reduction.
You could find out that every black cloud has a silver lining, if we are able to find you an improved level of funding, for less than you were paying your original factoring company.