Hi, I have a couple of quick questions.
1. I receive payments in stages, usually 50% at the start of a project, 25% half way through and the rest at the end. I was wondering if would be eligible to use invoice factoring?
2. What if I also work with retentions?
Patrick
Hi Patrick,
I hope this helps.
Stage payments
Some lenders will consider stage payments although typically the perceived increased risk will often be reflected in a lower advance rate (the % paid against in advance against each invoice) and/or increased security being taken by the lender.
The nature of stage payments normally means that there is an overriding contract between the debtor and the client which outlines the terms of trade. The risk for the lender is usually in respect of the debtors ability to withhold payments in the event that there is late/no delivery/completion. The funder will require a copy of the contract or purchase order with the debtor in order to determine their ‘risk’.
Retention payments
Yes some funders will consider customers where retentions are held by the customer. However, the funder will usually not provide funding against these invoices. In addition, as retentions usually means that there are over riding contracts the lender is likely offer a reduced prepayment (% paid in advance) and/or increased security in order to offset the additional risks.
I hope this helps to answer your questions. If you would like any more information please feel free to contact me or one of our experts on 0845 388 9725.
All the best.
Kat