confidential invoice discounting

Confidential invoice discounting or factoring are forms of cash flow finance being used by nearly 50,000 UK companies with the biggest growth area being confidential invoice discounting. These companies are generating a combined turnover in excess of £132 billion according to statistics released by the invoice discounting trade association and are constantly on the increase.

Confidential invoice discounting is very different to traditional bank overdraft funding in so far as there is very little difference, if any, between the overdraft offerings from each bank yet there is the world of difference between invoice discounting facilities offered  by the various providers, even though these differences may not immediately apparent.

Prior to 2001 the banks were happy lending on overdraft safe in the knowledge that their fixed and floating charge placed them near the top of the pile in the event of the failure of their client but the “Brumark” case changed all that as the Privy Council ruling pushed the banks too far down the security pecking order for their liking and they hurriedly started transferring their banking clients over to their invoice discounting subsidiaries as the security was better.

It appears that the majority of companies using confidential invoice discounting have just gone along with their bank manager’s suggestion and signed on the dotted line without first establishing whether or not there are more suitable options available which in many cases there are.

It should be straightforward but in reality it isn't and we have very real concerns with the way that some factoring and discounting companies operate which is why we have set out details of the possible pitfalls in the following pages. Whilst the poor level of sales ledger and credit control service offered by some factors is well known, opting for confidential invoice discounting can still leave a company open to problems with hidden costs and the artificial reduction in funding via unapproved debts etc as you will see if you take the time to read the next few pages

Please see the next page for details on selecting the invoice discounting company

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