4 ms·

My years of experience running service businesses has taught me that my company should not act like a bank. Instead we learned how to leverage a Factoring Comp

My years of experience running service businesses has taught me that my company should not act like a bank. Instead we learned how to leverage a Factoring Company when deciding if there was any risk when taking on new clients. Factoring Companies work with banks to do credit checks on your prospective clients and provide you with a credit limit and term period of which they think it's safe to do work with them. Service companies shouldn't act like a bank and lend money (service) to companies because we aren't equipped with tools to do it so we get burned as easy targets. The Factoring Company can do that for you and they report unpaid debts to all the major credit agencies for you. You'll very rarely regret not paying XYZ, Inc. the small service company, you'll probably regret not paying a factoring company that works with a bank like Wells Fargo for debt you signed up for. Oh and a factoring company that works with big banks like Wells Fargo will a lot more attorneys than XYZ, Inc. the small service company will ever dream of having. I used these guys: https://www.capitalcredit.com https://www.capitalcredit.com They took us on as a client when we got to about $40k/month in revenue. Not sure if that's still where they start. They were a lot more economical than the trendy ones that advertise on Facebook though.

TamDenholm 10y ago
i looked into factoring companies myself. I got 3 quotes and they were all an absolutely terrible deal. This is a quote i got from one of the companies, copied verbatim from the email they sent me, they were all around the same terms: Based on a turnover through the facility of £200,000: Full service Invoice Factoring – including credit control and cash allocation £35,000 facility review limit Prepayment of 75% against invoices 12 month contract with 3 months’ notice Service fee – 3.5% of invoices placed through the facility, subject to a minimum monthly fee of £470 (the higher of these two will be taken as the monthly fee) Discount fee - (cost of money) – 5.5% above base rate (0.5%). This is an annualised fee and based on an average borrowing of £20k would be £100 per month Set up fee – £350 Annual renewal fee - £350 Security: We would take a bond and floating charge and would request a director’s guarantee of 20% of the facility review limit. I decided it wasnt worth it.
- DanBC 10y ago
  Please don't use two spaces to blockquote text. It's broken on mobile. Please stick to the > convention.
  - deleted 10y ago
    [deleted]
- godzillabrennus 10y ago
  The cost should depend on the credit worthiness of your client and the term you want to extend. To me it's the cost of being able to sleep at night while running a service business. Consumers have practically forced retailers to eat credit card fees despite being able to require cash from consumers at one time. If clients keep skipping out on paying vendors then factoring will be the norm. Clients who don't have good credit will have to pay up front for service.

TamDenholm 10y ago

i looked into factoring companies myself. I got 3 quotes and they were all an absolutely terrible deal. This is a quote i got from one of the companies, copied verbatim from the email they sent me, they were all around the same terms: Based on a turnover through the facility of £200,000: Full service Invoice Factoring – including credit control and cash allocation £35,000 facility review limit Prepayment of 75% against invoices 12 month contract with 3 months’ notice Service fee – 3.5% of invoices placed through the facility, subject to a minimum monthly fee of £470 (the higher of these two will be taken as the monthly fee) Discount fee - (cost of money) – 5.5% above base rate (0.5%). This is an annualised fee and based on an average borrowing of £20k would be £100 per month Set up fee – £350 Annual renewal fee - £350 Security: We would take a bond and floating charge and would request a director’s guarantee of 20% of the facility review limit. I decided it wasnt worth it.

DanBC 10y ago
Please don't use two spaces to blockquote text. It's broken on mobile. Please stick to the > convention.
- deleted 10y ago
  [deleted]
godzillabrennus 10y ago
The cost should depend on the credit worthiness of your client and the term you want to extend. To me it's the cost of being able to sleep at night while running a service business. Consumers have practically forced retailers to eat credit card fees despite being able to require cash from consumers at one time. If clients keep skipping out on paying vendors then factoring will be the norm. Clients who don't have good credit will have to pay up front for service.