This is a method of providing capital and accelerating cash flow and is designed to help businesses to grow profitably from a sound base.

It combines flexible finance, linked to turnover, with a professional Debtor Administration and Credit Control Service. Compared with a bank overdraft facility, Factoring is a more flexible means of finance, effectively converting credit sales into cash sales.

It does not involve borrowing, but simply releases cash which is contained in accounts receivable.

The overdraft is based on the value of bricks and mortar and does not grow with your turnover. In a fast growing business the cash requirement is likely to be high to pay for materials and services before receiving payment from customers. The overdraft has no flexibility to accommodate this growth. If growth is allowed to a level where the cash requirement line crosses the overdraft line, the business could experience a cash flow crisis even though it is financially successful. The funds available from Merchant Factors increases as turnover increases, thus avoiding the potential cash flow crisis.

How does the arrangement work?

A contract is entered into with Merchant Factors wherein the business agrees to factor its credit sales. As goods are delivered or services rendered, an invoice is raised, a copy of which is sent to your customer, with a second copy, together with relevant proof of delivery, being sent to Merchant Factors. Once the invoice has been processed by Merchant Factors , an amount up to 80% of its value is paid out to the business. Merchant Factors account to the customers in a monthly statement and the customer remits the amount owing under the invoice to Merchant Factors. Upon settlement by the customer, the balance of the invoice (i.e. 20% of invoice value less payout of up to 80%) is paid to the business.

Our professional credit controllers will administer the sales ledger on behalf of the business. They will assess the creditworthiness of customers, attend to credit control and debtor administration, take care of the collections and institute legal action if needed, thereby making sure that the business is always kept informed of all debtor/customer transactions through clear, comprehensive sales and related management information.

• Your business has access to cash to support its expansion, when it is needed
• There is no upper limit: as your sales increase so does the cash available
• We apply 20 years of experience with over 2,000 clients to the job of collecting on invoices: we are expert, professional and highly efficient
• We help with credit control to minimise bad debts
• We offer 24-7 access to the real-time status of your debtors book via our website

What are the benefits?

Cash for expansion:

Since the level of funds available from our factoring facility is directly related to the current sales performance of the business, increased sales mean a corresponding increase in the amount of money available to the company, allowing its cash flow to keep pace with its expanding requirements.

Increased sales:

The business will now be able to diversify into other product lines, or buy more of existing lines, to increase stock and allow orders, which might otherwise be lost due to a lack of funds, to be fulfilled.

Increased margins and improved credit rating:

Bargaining power with suppliers will improve, allowing advantage to be taken of bulk settlement discounts to reduce the cost of goods to the company, improve gross profit margin and enhance the credit rating of the business by paying promptly. This saving could also go a long way towards covering the cost of Factoring.

Saved management time:

Time spent by senior personnel in assisting with debtor collection is reduced and hence Management will be able to concentrate on running the business, rather than the less productive, although important, task of collecting debts.

Reduced overheads:

Substantial and immediate savings in the cost of stationery, telephones, postage, Office staff and equipment will be made.

Minimizing potential bad debts:

Merchant Factors analysis of delinquent debtors will help to prevent losses and bad debts, as well as facilitating the early identification of high-risk debtors.

Improved return on capital:

Companies will note an improved return on capital, following from the ability to sustain higher Levels of trading on an existing capital base.

Expansion without loss of equity / control:

Maximizing the overall capital available to the business, without diluting ownership may be the most important benefit of all.

What will the Cost be?

Administration fee:

Our fee ranges between 0.5% to 2.0% of turnover, covering sales administration. The actual fee applied will be based on various aspects of the service, such as the number of invoices to be processed, value of sales and credit worthiness of customers.

Discount fee:

A discount (interest) fee is charged, normally 1.0% to 2.0% above the ruling Prime Bank Overdraft Rate, effectively on the amount advanced from time to time.

What is the next step?

Ask yourself if you would:

• Be able to expand faster knowing that, as sales increase, funds are always available.
• Feel more confident about future growth and profitability if you could easily evaluate your customer's creditworthiness.
• Be able to concentrate your efforts on what you do best if much of the administrative burden was removed from your shoulders.
• Benefit by retaining undiluted ownership of your business as it grows.
• Prefer not to give away discounts by calling for early settlement from your customers.
• Take advantage of bulk settlement discounts to reduce the cost of goods to your business if your cash flow allows it

If so, Merchant Factors will tailor a financial package specially suited to you. To arrange for a professional marketing consultant to call on you at your place of business and discuss how Factoring can help your business to grow, simply contact us via email, fax, telephone or post.