Commercial finance glossary
Invoice finance charges
Pricing for facilities is very competitive and based upon the individual businesses and takes account of the workload, merits and risk profile of the business.
That said, pricing should not be viewed as a stand alone criteria. When assessing the best business partner it is best to consider service also - So value for money as opposed to just a low fee.
There is a variance between fee levels between factoring and invoice discounting facilities. One facility may be more suitable for your business and serve to optimise your sales. Services are tailored to individual businesses the fees will depend upon your specific requirements.
In general, there are two types of fee: Cost of the money you use, which is extremely competitive when compared with other forms of finance. This is often called discount charge or borrowing rate. The second is a service fee, which is based upon your annual turnover.
Service and cost structure:
Invoice Discounting:
- By sending us invoices via an electronic link (we will supply the necessary software free), up to 90% of the value of invoices (up to 120 days, i.e. 4 months after the end of the month in which the invoice is raised) will be made available.
- Your customers will settle with YOU direct and you bank the monies into a trust account held with us.
- The customer is unaware of our involvement.
- Funds are sent via the BACS system to your bank account (3-day cycle) or by CHAPS at £25 per transaction.
- A dedicated Client Manager will be assigned to your account to ensure a smooth transition into invoice discounting and then manage your ongoing relationship.
The cost structures, will be based on the projected turnover (where you give your customers credit terms) and the pattern of your trading activity.
- Cost of funds Typically 1.5% - 2.5% over Lloyds TSB base rate or the appropriate currency interest rate.
- Service cost Negotiable, dependant on size and structure of facility (A minimum monthly fee may apply). The cost the cost of our Surveys and Account Management.
Normal Trust Account operating charges (Currently £0.04 per £100.00).
Factoring
Traditionally factoring meant that the factor would collect your outstanding invoices on your behalf. Nowadays, we pride ourselves upon our flexible approach in working with our clients/partners in providing the right solution for your business. We will discuss your requirements with you and complete a service selector to the ensure you get the right level of service for you. You may wish us to chase your customers at our discretion, credit control your top 5 customers only, credit control you top 10, the full ledger or specific (named ) customers only.
At minimum, we will provide all the sending of statements, supported by a little telephone contact. In this way we can tailor a service to suit your needs so that your good relationship with your customers is maintained.
The full factoring service would work as follows:
- By simply sending us copy invoices via an electronic link (we will supply the necessary software at no additional cost), up to 90% of the invoices, will be made available to you. *Your customers will settle balances with us direct and the balance less our charges will then also be made available to you.
- Payments are routinely made by BACS, free of charge (3-day cycle). CHAPS are charged at £25 per transaction.
- An Account Manager or a Client Care Team will be assigned to your account to ensure a smooth transition into factoring.
- This service includes the issuing of monthly statements and reminder notices to your customers as well as formalised debtor chasing. In addition, we will feed back any relevant information that we obtain during our contact with your customers.
- Credit vetting services for all new account customers at a small cost should you wish to use it
- We operate no concentration restrictions on your customers providing the debtors hold a suitable Credit Rating and the outstanding balance is less than £50,000.
The fee structure is again based on a service fee and a discount charge. There is no trust account fee as your customers pay into our account. This can also save you money by cutting down your bank charges.
For an additional small fee you may decide to bolt-on Debtor Protection on your facility.
