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• 24 Feb

  Factoring With An HMRC Time To Pay (TTP) Arrangement

  This is an example of a UK SME company that we were recently able to help find the funding to support their projected growth. In this case, the company was a small driver recruitment company within the temporary recruitment sector, and they were looking to grow their turnover substantially to a single customer.

  Use of invoice funding within the temporary labour sector is very common, and it is the sector where there is the highest takeup of this type of business finance.

  Overdraft Restricting Growth

  The company already had an overdraft in place but the small limit was proving restrictive and they needed further working capital in order to support their growth plans.

  This is often a situation that we come across, the amount of funding available via a traditional bank overdraft is not necessarily sufficient to support a small, rapidly growing business that may not have enough assets, outside of the debtor book, to support high levels of lending in a traditional bank format.

  The benefit with a factoring facility is that it grows in line with the turnover of the business, as the amount of funding released is based on the size of the sales ledger, rather than the other assets that are available. An overdraft normally has a fixed facility limit that doesn't change without a further application.

  Declined By Factoring Companies

  In this particular case, this customer had already been declined by several other providers, that he had approached directly, due to various issues that made this a more complicated proposition.

  Firstly, they were dealing with a single debtor, which is something that not all invoice finance companies are prepared to entertain. Secondly, the prime mover was not a homeowner. Homeownership has become an increasingly common requirement among some of the invoice funders, although not all providers take the same approach.

  HMRC Time To Pay (TTP) Arrangement

  Lastly, the business had a "Time To Pay" arrangement (TTP) in place with HMRC, in respect of some outstanding VAT. A time to pay arrangement means that HMRC have agreed that the company can pay off its VAT arrears over a set period of time, via regular more manageable payments. This is of course good news to the business, but can sometimes be perceived negatively by external lenders. Therefore we needed to find them a provider that would take a sympathetic view of their situation. We were able to find them a small independent factoring company that were prepared to offer a facility that would allow them to meet their growth projections.

  This is an example of how we can often help customers that have been declined when they approached factoring companies, and other lenders themselves.

  By Glenn Blackman