New Business: Overdaft or Invoice Finance?

BargainHunters

Hi All

My friend is looking to set up a recruitment company and has asked me to get involved as a silent partner. I will be introducing some capital for a shareholding.

The company will however need additional working capital and we are torn between a business overdraft or Invoice Discounting/Factoring.

Does anyone have any recommendations?

Much appreciated.

bengalknights

How much are you expecting turnover to be?

Invoice Discounting/Factoring would be best if expecting large turnover as that way your cash flow keeps upto date and in some cases you dont have to worry about chasing debt etc.

BargainHunters

We are hoping turnover to be up to £1M within a couple of years. We met with Invoice Finance brokers http://www.gordonferguson.co.uk who say they will source us the best funding package. Early discussions are looking like invoice finance. Will keep you posted

morgani

Think carefully before choosing the invoice finance route. It's much harder to get out of than an overdraft and the option is still there in he future.
Most factors will only take on the good debt anyway so you don't necessarily benefit if everyone will pay well.
The majority of businesses I have acted for who have used factoring have regretted it. Most have ended up stuck. One I helped get out of it back in September. He has had a hard few months but is only now starting to recover properly.
Often the only winner is the factoring agent. They calculate risk of non-payment into their charges and often from experience know what they are doing.
Just choose wisely.