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• 18 Apr

  Separating Your Invoice Finance From Your Overdraft Or Bank Loan

  We have previously mentioned the consideration some clients have for not putting "all their eggs in one basket" by separating their invoice finance facility provider from their bank provide an overdraft or term loan, for example in my article about How To Choose A Factoring Company.

  However, we have had an example of a prospective client who has experienced how this issue can damage the cash flow of a business.

  The prospective client had an invoice finance facility with one of the independent invoice finance companies and they also had a substantial overdraft from their bank. Their bank had an invoice finance arm so they encouraged their customer to bring all their lending under one roof and the bank took over the invoice finance facility in addition to maintaining the substantial bank overdraft.

  The company suffered a bad debt and the bank was aware of this as they were operating the invoice finance facility. In view of this, they reduced the company's bank overdraft substantially, seriously affecting their cash flow. If that company had kept its invoice finance facility with the independent provider, separated from its banking facilities, this issue may not have occurred as the two facilities would have been considered separately rather than as a single exposure or risk for one lender.

  By Glenn Blackman