Contrary to popular belief switching factoring or invoice discounting companies is relatively straight forward. However it is more difficult if the exiting funder doesn’t want want you to leave. Under extreme circumstances the existing discounting company will have notice periods built into the terms of the deal which they will require paying in full. As notice periods could be anything from a month to six months a chunk of minimum payments can soon add up. However if the relationship has totally broken down the existing provider may be willing t0 reduce their fees and the new provider may be willing to contribute to the fees to ease the pain so to speak. In addition a minimum contract from one to three years is not unusual and this must also be taken into consideration.
How you will be dealt with depends on the existing provider. Many of the banks prefer to keep a very clean and straight forward portfolio and if you don’t meet the banks strict criteria they will be more likely to let you go without a fuss. They dont want to be seen hindering a business especially if it is one of our government owned institutions. One of the biggest enquiries at the moment is for businesses wanting to switch from bank owned factoring and invoice discounting comapnies to more flexible providers.
Once all parties have agreed to the move there is a code of conduct that exists between the two funders. The new finance company will set up their own trust accounts and the existing funder will sweep any money coming to the old accounts and pay it across until your customers get to grips with the change of banking arrangements. Hopefully the small amount of pain will result in new found financial freedom and flexibility. So there!
Tags: Factoring, invoice discounting
