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• 04 Feb

  Help With Invoice Finance Credit Limit Problems

  

  Construction sector debt can be difficult to fund against, with only a few receivables financing companies being able to assist companies trading in the construction sector. It is also a common problem that not all funders are able to write the same credit limits on customers, this can lead to funding restrictions in some cases.

  This is a case study about how we helped a customer with debtor credit limit problems.

  Solving Credit Limit Problems

  This is an example of a temporary recruitment business, servicing the construction sector that we were able to assist. They were already with an invoice finance company, although they were struggling with funding restrictions.

  Reduced Prepayments & Credit Limit Issues

  The prepayment percentage had been reduced by the invoice financier, and their funders were unable to provide credit limits on several of their customers. This was causing cash flow restrictions due to the low level of funding generated by their previous funder.

  The Solution

  As a solution, we introduced them to a flexible, independent invoice finance company that were able to offer a blended funding formula. Against their more straightforward, recruitment sales, the funder offered a higher prepayment percentage. Sales to the construction sector were funded at a slightly lower level.

  In addition, the new finance company were able to provide further credit limits on debtors that resulted in the level of funding being double that generated by the previous funder. This is a significant uplift in working capital for our client, that will support their ambitious growth aspirations. The client's payment ceiling (the maximum level of funding at any one time) has already been increased by a third so that the funding grows in line with their sales, removing any funding restrictions.

  The dramatically improved funding formula will also pay dividends when future invoices are submitted for funding as more cash will be released than would have been possible under the previous facility.

  By Glenn Blackman