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• 21 Dec

  Financing Factoring Companies

  The source of financing factoring companies use can come from a variety of different avenues. You may want to take this into account, when you are choosing which factoring company to pick, as you may be worried about the effect on pricing and reliability of funding.

  Need Help?

  We can advise you about factoring generally, including where funding is coming from, either contact us or call Sean on 03330 113622.

  Financing Factoring

  These are a number of sources of financing that are commonly used, either wholly or in part, by invoice financiers (in no particular order):

  Back-to-Back Lending

  Several of the larger invoice finance companies have pursued a niche whereby they provide "back-to-back" facilities to their smaller counterparts. This means that a large IF company may be funding many smaller providers. Normally the smaller company will have some degree of autonomy about the customers that they take on, however, typically there will be some degree of oversight - particularly in respect of larger facilities - from the company that is ultmately providing the funds e.g. a large bank. There are obvious pricing implications when lending money from another provider, but this practice is wide spread.

  Own Money

  Some of the providers are lending their own funds, either fully or in part. This can be true of small, independent providers but it could also be said of the large banks.

  Government Money

  There has been publicity recently about providers lending money that has been provided by funding vehicles set up by the Government. This money is being injected into the market to try and increase the alternative finance options that are available to customers.

  Peer-to-Peer

  True peer-to-peer lending will be funding borrowed from one or more businesses that are similar to your own. Often customers think that this might result in favouable rates, or terms. That is not necessarily always the case, but again we can explain the options, and pricing, to you.

  Investment Capital

  Often independent providers will have investors that have injected capital for them to lend, the requirement for a return by their investors will influence the cost of borrowing. Again, the size of the investment will likely determine the maximum amount of funds they will advance to any single customer.

  Implications of Funding Sources

  The source of the capital used by a lender can affect the cost to borrow and risk approach of the company lending the money. However, there is no simple formula that predicts the cost according to the source of funds.

  The best approach is for us to understand what you are looking for, and we will be able to explain the options and identify lenders that can match your price, service and funding expectations.

  Understanding the source of their capital is often more a matter of clarity regarding their business model, rather than something that will directly and soley determine pricing.

  By Glenn Blackman