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• 30 Jul

  Example Of Single Debtor Invoice Finance Pricing Selling To An RPO

  We have dealt with a number of recruitment companies selling to RPOs and neutral vendor customers and this is an example of a recent quote for a single debtor invoice finance deal, that we sourced for a client.

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  The client was turning over c. £500K per annum and only selling to an RPO debtor. The quote was for recourse factoring, which means they receive prepayments against invoices (in this case at 90% of invoice values), and they receive an invoice collection service. Recourse means that there is no bad debt protection should your customer become insolvent - but that is a risk some customers are happy to take.

  Single Debtor Invoice Finance Price

  The single debtor invoice finance quote we found was for recourse factoring with the following price:

  • Service charge: 1% of invoice value - with no minimum fees. Minimum fees kick in when a client fails to meet a minimum level of required turnover. In this case, there were no minimums, meaning that our client didn't have to worry about reaching any threshold turnover levels.
    
    
  • Discount charge: 4% over base rate. A discount charge works in a similar way to interest in that it is a percentage charged against the amount of funding provided. However, it is only charged for the number of days that the funding is drawn down. Once the invoice is paid, the funding is repaid, and the discount charge no longer accrues.

  An Example Of The Cost Of Factoring An Invoice

  As an example, a £10,000 invoice raised to a customer, on say 30-day terms, would potentially release up to £9,000 of funding immediately. Assuming the customer pays after 30 days, that would accrue 30 days discount fee.

  The approximate fees incurred would be as follows:

  • Service charge - 1% of the invoice value = £100 (+ VAT if applicable).
    
    
  • Discount fee - £9K funds in use for 30 days (assuming 0.75% base rate and 365 days in a year) = (((9000 x 4.75%) / 365) x 30) = £35.14.
    
    
  • Total charges are, therefore: £135.14 to receive £9K for 30 days.
    
    
  • That's just over £15 per £1,000 of funds prepaid, per month.
    
    
  • In addition, the factoring company are undertaking credit control, a cost that can be offset against that price. 

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  See details of our: Pricing Research.

  By Glenn Blackman