#factor select, invoice discounting, factoring, invoice finance, Factoring quote, Recourse Factoring, Credit Control, factoring companies, factoring solutions, web design, IT support, caboodle IT, sales ledger management,
|
|
One of the key advantages of invoice finance is that this facility is self-securing. That is, the facility relies on the trade debtors of your business and does not interfere with other business or director personal assets as traditional
bank finance so often does.
Your factoring or invoice discounting agreement will include an 'assignment' of your trade debt to the factor. This, put simply is the sale or assigning of the benefit of each invoice as it is raised and notified to the factor.
A recourse agreement (one without bad debt insurance) provides though for the return or recourse back of invoices that become 'doubtful' debts (including disputed invoices) or subsequently bad debts. In practice though you do not refund
monies to the factor should these arise, but these values are held as a reserve against your sales ledger as in the example above under How does it work in practise - funding?
Occasionally, to improve the factors position they may take a fixed charge over your trade debtors. Only very much by exception will a factor seek a fixed and floating charge over the business assets and often arises where other asset
backed facilities are to be provided.
A debenture holder, i.e. your bank, has the right to appoint a receiver over your business if they so wish to. A factor (unless they hold a debenture / fixed and floating charge) does not have this right.
In the case of a partnership or sole proprietorship some factors may wish for the invoice finance agreement to be signed in the presence of your solicitor and the document forwarded on by them to the factor or their solicitors to be
registered as a bill of sale.
Where you may have already provided a charge, say to your current bankers, over your company and this extends to book debts then the factor will require the bank to waive their charge over debtors, giving priority to the factor.
This will be handled by the factor directly with your bank. It is though likely that if debtors have been used to support borrowing with your bank, your bank may want this borrowing repaid or reduced once their waiver to the factor is provided.
Given that it is most likely that your invoice finance facility will be used in replacement of your overdraft facility then this should be possible from the initial injection of cash that the invoice finance facility will generate. (Finance is made available on current debts owing at the commencement of your facility in addition to those then going forward.)
Blue Asset Finance does not profess to provide legal opinion and on these matters it is strongly recommended that you consult your solicitor.
|
• Click here to retrun to the Product guide index
|
|
|
|
|
© by Blue Asset Finance, 2006. all rights reserved. Unauthorised use of materials strictly prohibited.
|
