| Almondbury Finance, based
in Huddersfield, West Yorkshire is here to solve your cash flow
questions.
What do I need to do?
At outset all factoring companies will
want to meet you to understand your business and its needs.
If that meeting goes well, they will conduct an on-site audit
of your books and records. For smaller factoring deals this
can often be done in one visit, but otherwise separate visits
will probably be required.
You may be given an in principle offer setting
out headline terms and conditions at, or following, the initial
meeting, but a formal offer letter will only be made after
a satisfactory audit has been completed.
Once you have accepted the formal offer, the factor or discounter
will draw up the legal documents for your review and signature
ideally after you have taken legal advice.
With your authority, the factors will obtain
any necessary waivers from your bank or other debenture holders
and make cash available as soon as they have loaded your details
onto their systems and verified the validity of your outstanding
invoices.
When will the facility be in place?
Normally the process should rarely take
more than a few weeks and can often be completed within days.
How easy is it to terminate the agreement?
All debtor finance facilities are subject
to a notice period, which will be set out in the offer letter
and legal documents. Should you decide to repay the facility
earlier, you will need to negotiate a settlement figure or
termination charge.
Some clients are concerned that it may be
difficult to repay a facility once it is in place. Clearly,
this can apply to most forms of finance, but is particularly
relevant when comparing debtor finance with, for example,
a bank overdraft. In reality, the facility becomes integral
to the business. Repayment eventually comes from improved
cash management and retained profits.
What other things should I consider?
Many potential clients are concerned about
the possible damage to customer relationships, but this rarely
happens in practice. The factor will agree with you from the
outset the way in which they will collect your invoices. They
will encourage you to maintain an active involvement in your
customer relationships and they will be aware that upsetting
your customers, without good reason, will potentially damage
their relationship with you. As an alternative, we might be
able to help you to secure a facility that leaves you in control
of collections.
Some potential clients think it would be
in a factors interest to slow down their collection activity
to maximise the interest they earn. In reality, the opposite
is true. Average debt turn in a factor's client book is one
of the most powerful benchmarks used in assessing their efficiency
and the quality of their security. The faster the debts turn,
the happier the factor will be. Ultimately, the potential
income lost as a result of unhappy clients terminating their
facilities, plus the risk of losses arising from invoices
going stale, far outweigh any possible temptation for the
factor to earn extra interest.
more...
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