Are Invoice Factoring Companies Different from One Another or is it a case of Money is Money?
As a business we place around 60 invoice finance facilities per annum. The industry generates around 8,000 deals placed per annum and that is customers who are moving from funder to funder and customers that are new to the industry. As you can imagine those 8,000 clients are going to different funders, is that because of clever marketing or are they going to the best funder for their needs.
The answer to that question isn’t really a simple one because as you can imagine any funder you talk to will tell you how different they are from the other and will sell you on their industry leading ways. For the most part of what they tell you is true, but it is difficult to sift through what is true and what is fictitious because each funder does have their ups and downs and each funder wants to increase their market share, and they are not exactly going to sit there and tell you their pitfalls are they.
The honest answer is that it’s a little of both, let me explain what we mean. As an industry itself there are a wide variety of different funders from small to large independents to large multinational banks. The honest answer is allot of the funders do overlap in terms of how they operate and the kind of deals they can look at. So for example if you are a manufacturing company who produces a variety of dairy products and sell these to shops and supermarkets with a good invoicing trail and no adverse credit, then you would be a fairly simple deal to place and you would likely have funders falling over themselves to look at your business and in some cases it would be a case of quickest funder to the bottom in terms of cost. However if you are a construction/ recruitment/ cleaning business to mention a few and you have very contractual debt and a checkered past then your deal would be fairly tricky to place.
Deal placements aside you also need to consider which funder will service you and your clients better and think about exactly what you want from a funder. Do you want a funder who chases your customers aggressively to bring in your invoices, do you want a more hands on service, do you want fewer audits and a higher advance rate etc etc etc. Let’s say for arguments sake that you have found 3 funders who have offered you exactly what you want at varying prices, the logical thing to do would be to choose the cheapest funder based on what they have told you, and in part there is absolutely nothing wrong with making that assumption.
The truth is without having someone to advise you on what kind of funder you should be looking at and holding your hand through the process, you could end up in a facility that isn’t what you have been offered and tied into a fairly lengthy contract to boot. Subject to you getting some independent advice or talking to a broker who has close relationships with all these funders, then at this point you will likely be talking to a few funders who operate within similar parameters and then you are in a position of power were the funders falling over themselves to help you.
The trick is to get the right advice and if you can get this not just from us but another source that would give you confidence. You should then be talking to the right funders who would be able to look at exactly what you are looking for and have a successful relationship with your finance partner for many years to come.
Quite a few funders are not going to be big fans of reading this blog, which basically says that allot of funders are two sides of the same coin if you pardon the expression. But that aside we hope this has helped you make a decision on what you are looking at and as you can imagine if you have any questions you think we could help with, please don’t hesitate to get in touch.