Factoring/Invoicing

Prits8

I have just started up my own recruitment business and would like to know what the best way of invoicing would be to get instead cashflow, I have heard that factoring is one way and the second way was something called a "Small business finance Guarantee loan" whereby it is 75% funded by the DTI and 25% funded by the bank. Has anyone heard of this?

What is the best option?

bargainhunt_3

I am not familiar with the latter, but factoring simply converts your invoices into cash. You basically give the factor control of your invoicing, or send invoices to them. You can then draw down funds against the invoices. I gather they will usually part with up to 80% of the value. When the customer pays you get the rest. They take a fee of a few percent plus interest. It has the advantage that you will get access to a credit line based on your sales, so as they grow as does the credit line. However if they fall at some point you may find yourself in some trouble.

Factoring has helped a number of businesses and I may consider using it for mine at a later date. However you should ask people for views on which company to use. I have heard some awful stories of the companies 'misplacing' invoices or harassing customers to the point where they will not buy from your company.

Octavian_2

Small Firms Loan Guarantee Scheme http://www.businesslink.gov.uk/bdotg/action/detail?r.l3=1073868460&r.l2=1074453326&r.l1=1073858790&type=RESOURCES&itemId=1074447105&furlname=sflgs&furlparam=sflgs&ref=http%3A//www.google.co.uk/search%3Fnum%3D100%26hl%3Den%26as_qdr%3Dall%26q%3DSFLGS%26btnG%3DSearch%26meta%3D&domain=www.businessadviceonline.org

Factoring
http://www.businesslink.gov.uk/bdotg/action/layer?r.s=sl&topicId=1073924180#

For the SFLGS you will need a cracking business plan as the banks are still exposed to 25%. You need to commit all your sole assets to the bank first. I suspect with the factoring that you may also get some sucking in of teeth as well ivo your industry which isn't without the occasional local difficulty. But shop around and you may be lucky, albeit the level of risk will be reflected in the interest rate.

inmypocketnottheirs

I have been looking at factoring also for my business in a totally different field. I see that Lloyds TSB have a specific product for recruitment companies have a look at https://www.cashfriday.co.uk

HTH