What is the minimum contract length?
Tue, 01/13/2009 - 22:34
Hi,
I have two quick questions.
-Could someone please tell me what the minimum commitment is for an invoice factoring contract? I have around £20,000 worth of invoices each month and am thinking of using invoice factoring for the next six months or so.
- We have just secured a 12 month contract with the local council installing kitchens and bathrooms. Is my business as a plumbing contractor suitable to use invoice factoring?
Cheers,
The minimum turnover level does vary depending on which lender although the minimum requirement is usually circa £50,000 pa. So with turnover of circa £240K (plus VAT?) you would not have a problem fitting into certain lenders criteria.
It is fair to say that many lenders in the present economic climate are moving away from funding 'contractual debts'. Often if you have an overriding contract with a debtor then this could well be subject to contingent liabilities in the event you are not able to finish the contract. This could result in the funder not being able to recover their exposure from the customer. However, there are still several funders who are still in the market for this type of exposure but they will normally take additional (perhaps personal or bricks and mortar) security in order to offset their potential risk.
Having said all of the above, experience tells me that dealing with councils will tend to more on a purchase order basis and an overriding contract might not have contingent liability clauses. The only way to be sure is to view the contract.
Simon Carter - Director - Touch Financial