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In response

A good contact of mine recently raised a number of concerns that clients of hers have with factoring and invoice discounting.

There were some very good points but some were worth looking at in more detail. There are some understandable concerns some borrowers have regarding invoice financing.

Here is my response.

1. The notice period will clearly mean that facility will have to be repaid but generally speaking a business should plan around this or find alternative means. Borrowing is borrowing. The minumum term of one year i think is a greater issue but i do know lendrs who will set that at 6 months and in one case 3 months

2. The amount you pay will depend on the competition for your business. Fees can be easily driven down.Far too many borrowers simply go to first they can find and assume its a market rate. Or they have a lazy accountant who will do the same (for commission) There are over 40 lenders in the market

3. The lender cannot really decide on the terms of business for new clients. They may not lend if they do not feel the client is credit worthy (although there is a way of controlling this ) and extended terms can be an issue. The type of contracts they will not touch (paid when paid for example) are often understandable

4. If a lender does not lend against certain invoices then this should have been clear from the terms of the contract. See my blog for a recent example. The exception is credit ratings which as i mentioned can be managed

5. No fees a re genuinely hidden They have to be there in the contract. The issue is that many borrowers simply do not read or understand the details sufficiently. However certain lenders are notorious for virtually misleading clients

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