factoring pitfalls - case history

Another firm of recruitment consultants with sales of £7.5m per annum and over half of their turnover being generated from overseas customers and factoring with one of the major independents approached us with tales of restrictive credit limits.

The total outstanding debts were about £1m yet the factoring company were applying ridiculous limits including £10,000 on one of the high street banks and the same figure on their own parent bank.

The company was supposed to be funded to a level of 80% of invoices but due to the ridiculous restrictive practices, the actual funding was only 60% and the company had to cease it’s sales and marketing function as they couldn’t finance any new business despite being highly profitable.

We arranged a factoring facility with an alternative provider where 80% actually meant 80% and not only did they receive an immediate injection of working capital by transferring, but the costs were also much cheaper.