An increasing amount of the work I am currently doing is being driven by the invoice finance industry, and by the need to help providers and their customers release and access higher levels of funds. To my mind, a factoring or invoice discounting facility is only as good as the levels of funding being released, and if this is being restricted by prohibitive credit limits, then steps must be taken to solve this problem.
The obvious solution can be to find a new invoice finance company to work with and set up a new deal. This, is not, however, always the easiest option to look at. It can be time consuming, expensive, and may not always solve the problem. Also, with notice periods normally in place, you may have to wait up to 6 months before the problem can be effectively solved.
This is where Credit Insurance can be very valuable. By having your credit limits assessed by a third party insurer, we can often find a supplier who can insure your debts to the levels you need. Because the debt is insured, your invoice finance supplier then has the confidence to release higher levels of funding to the newly insured limits. I recently helped a new customer who needed £50,000 funding on a key customer, but were being restricted to £10,000 by their factoring facility. By putting a credit insurance facility in place, they were able to up the funding limit on this customer to £60,000, as well as getting several other limits increased. The improvement in cash flow made the outlay on credit insurance virtually negligible, and has allowed my client to grow substantially, and with safety. The added bonus is that with the credit insurance in place, they will also be able to renegotiate their funding contract at renewal and hopefully secure an improved rate.
At a recent meeting with a major high street bank, we discussed how credit insurance can also help a banks clients. Key points to note from the meeting was that banks will view credit insurance as a 'big tick in the right box'. Because of this, it makes it easier for banks to agree to new facilities, or to negotiate more favourable rates on current facilities.
The key thing to remember is that credit insurance is not just about protecting a company against bad debts. Of course, this is a major factor, but it is not the be all and end all of an effective facility. Credit insurance is there to help a company credit check their customers (new and old), to assist with the collection of over due debts and protect against bad debts. But it is also there to help release release greater levels of funding, offer safety and security to third party lenders and business partners and to help SME's grow.
As always, for more information then please contact me directly through email (samf@exchangeis.net), twitter (Sam_exchangeis) or message me through Linked-In.
