[Beneddie1112]

Originally Posted by HuggyBear

Sorry my fault again - typing to fast - they will be refunded TO the PayPal account they used to pay - now I know why companies offer merchant services as there primary method of payment over PayPal and Google Checkout - Sounds a lot easier...

Can I suggest setting up an account with Streamline?

[IP2]

Originally Posted by HuggyBear

7 days

Providing you put it in writing, if it is just on your website and not presented in an unchangeable medium then the customer has 3 months and 7 days.

Any reccomendations for a Merchant account? My business account is with Lloyds TSB so Cardnet would sound like common sense...
Are payments received same day regardless of the bank the account is with?

I use both Cardnet and Barclays Merchant Services and never had any reason to complain about either of them. I am not certain but I think our card payments that go to a different bank from the merchant provider take a day longer.

[HuggyBear]

Originally Posted by IP2

Providing you put it in writing, if it is just on your website and not presented in an unchangeable medium then the customer has 3 months and 7 days.



I use both Cardnet and Barclays Merchant Services and never had any reason to complain about either of them. I am not certain but I think our card payments that go to a different bank from the merchant provider take a day longer.

Do either charge you more than 3.4% + 20p for each transaction?

Also, would it count if the terms of sale where printed on the invoice that is sent with the customer?

[IP2]

Not got a bill to hand, but we play them off against each other to screw them down, fairly sure we don't pay anything like that percentage, nearer half that if memory serves. Plus guaranteeing volume helps when negotiating a better price.

[Ian J]

Originally Posted by James Smith

Personally I wouldn't go into business using a factor out of choice, however it is spun these days it is very expensive, especially for smaller businesses, and really is the "lender of last resort". They tend to have rather fierce terms including forcing you to put all your sales through them - i.e. its very hard to break out of the cycle of using them when they are swiping most of your profit margins!

I see James all over the internet world telling people that factoring is the "lender of last resort" and it really is a load of rubbish akin to me telling everyone, whatever their circumstances not to use an accountant as they invariably rip you off.

Factoring is an excellent financial tool for a growing company as the availability of working capital rises with sales whereas the more old fashioned forms of lending are only interested in the Balance Sheet and available security and every time sales increase and you need more money you have to go back to the bank cap in hand to ask for an increase in facilities.

Let's assume that a company is turning over £250,000 pa and making 15% net which equates to a profit of £37,500. If factoring generates enough cash to enable you to double your turnover the profit will rise to £75,000 before factoring costs and even allowing for James's ridiculously high cost of 5% it would still result in increased profits on the bottom line.

Having tried to set the record straight I regret to say that i don't think that it's suitable for your business as it's aimed at businesses who sell to other businesses on normal account terms whilst you appear to be predominately aiming at private individuals who will pay by credit card anyway.

[James Smith]

Ian I know from other forums that you give really good advice and I don’t doubt your integrity for a minute but I have simply never had a happy experience with factoring with any of my clients. I can only talk from experience. Normally the main issue I am addressing is how to get them out of the contract and back to making money rather than chasing growth.

Again don’t know what your fees are but the client who’s books I am currently completing was charged 4.8% of turnover from a high street bank. T/o was only £150k so although I think the “headline” rate quoted was 3.5% but it racks up with all the fixed charges. Now finally making good money in the last 3 months when he is back in control of his finances. To do this we had to shrink the business by 40% to within his working capital means and dramatically improve his cash collection procedures.

In terms of the maths, if you have your 15% margin per your example, 5% factor costs is 1/3rd of your profits! If you have a £240,000 t/o business with a 60day cash cycle (ie £40k cash requirements) making £36k PA, to double the t/o with a factor charging 5% you would make £48,000. This doesn’t sound much extra to me personally given the effort to double sales. Moreover when you analyse it you are paying £24,000 in one year just to finance an extra £40,000 in working capital (we previously had £40,000 available at £240k t/o)……………probably better served with a combination of a bank overdraft and tighter cash flow management, E.g. proper credit control, reducing terms, offering discounts for early payment etc. All doable things and good business.

Yes factors can be very useful people to know, especially when banks wont lend and a company is looking at an abyss, but to finance growth? Many things to do before you get to factoring I am afraid. It also spooks customers as they think you are about to go bust when they find themselves paying the factor.

[Ian J]

Originally Posted by James Smith

Again don’t know what your fees are but the client who’s books I am currently completing was charged 4.8% of turnover from a high street bank. T/o was only £150k so although I think the “headline” rate quoted was 3.5% but it racks up with all the fixed charges.

I don't charge anything as I receive a fee from the lender if an introduction is successful. If you want to give me some more details of your client (in private of course) I will happily see if I can find a better deal for him

Yes factors can be very useful people to know, especially when banks wont lend and a company is looking at an abyss, but to finance growth? Many things to do before you get to factoring I am afraid. It also spooks customers as they think you are about to go bust when they find themselves paying the factor.

Banks are lending less and less on overdraft nowadays pushing suitable businesses in the direction of their own factoring subsidiaries where the security is better and the returns higher and in many cases it's factoring or nothing.

I agree that every company should have their house in order before approaching a factoring company and admin systems and credit control comes first but I have to disagree with you about customers being spooked by their supplier using a factor as it's mainstream lending nowadays with close on 50,000 UK companies using factoring and invoice discounting