• How Important Is Disclosure And Confidentiality?

    How important is confidentiality or disclosure around invoice finance?Interesting question - how important is confidentiality when it comes to your invoice finance facility?

    Confidentiality Versus Disclosure

    There are many types of factoring arrangement but with a confidential facility, your debtors don't know that you are using invoice funding. Even if your provider is undertaking the credit control, they will be doing it in the name of your business - under your brand (called Confidential Factoring). Some companies prefer this as they don't want their customers to know that they are using an invoice funding service.

    A "disclosed" facility is where your debtors are aware that there is an invoice funder involved. They will often be aware of this as your invoices bear an assignment clause (saying customers have to pay the funder), and they may receive other correspondence in the funders name. Some people prefer this, thinking that the name of a large well known funder such Bibby Financial Services or Close Brothers Invoice Finance, carries some weight that customers will respect, and even pay more promptly.

    Is Disclosure Important?

    We had a case recently where an existing client was using a confidential factoring facility but their provider felt that they needed to move from confidential to disclosed. The prospect was initially very much against this, and the race was on to find them an alternative "confidential" facility as quickly as possible. The nature of the debtors made it difficult to find a CID facility, so eventually the prospect moved to recourse factoring arrangement.

    It made me think about how important disclosure versus non-disclosure really is. I suspect the fear of the what customers might say is actually worse than the reality. These days the use of invoice funding is widespread and common in many sectors, such as recruitment. Using invoice funding only really means that your cash flow is likely to be in good shape as you don't have to wait for your customers to pay, in order to access the cash from your sales invoices.

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