Many agencies may refrain from changing their funding provider due to the perceived difficulties in transferring their sales ledger and business. These instances are more frequent the larger the agency in question. In reality, the transfer of debt from one provider to another is a straightforward process as long as all parties involved follow the correct process.
Transferring from one funding provider to another involves the transfer of your entire debt book and all outstanding invoices and time-sheets pertaining to that debt. Typically speaking, your new provider will contact your existing provider with the intention of purchasing your outstanding ledger and, depending on the amount of debt, arrange for an independent audit of the ledger. For example, if you have a clean outstanding debt book of £50,000 with Funder A, your new provider, Funder B, would pay Funder A £50,000 to take ownership of the debt book. Funder B would then collect the outstanding debt from your client and provide funding moving forward.
The purchase of your sales ledger will be guided by the quality of your debt book. Your new funder will review your debt prior to purchase and, assuming all debt is within credit and age limits, will look to obtain the relevant credit limit themselves to purchase the debt.
If you have any over trading, where your outstanding balance with a client is higher than your credit limit with them, it is likely that your new funder will be unable to purchase the debt as it will be be unprotected by credit insurance.
Similarly, if you have any debt that is older than 90 days from the date of invoice, it is likely that your new funder will be unable to purchase this debt for the same reason.
Finally, if your new funder is unable to obtain credit limits for the clients with which you have outstanding debt it is likely they will not purchase the debt.
This can change on a funder-by-funder basis but generally speaking funders will have an all-or-nothing approach to purchasing debt.
If you have bad debt on your ledger your new funder is unlikely to purchase it. As a result your options would be to remain with your current funder or purchase the bad debt yourself and transfer the remaining over to your new funder.
Yes, and there can be increased benefits in doing so. Depending on how much you have drawn down from your factoring facility, moving to an invoice finance provider will usually provide an instant cash injection. Factoring is usually provided for 85% of invoice value, whereas invoice finance is provided at 100%. Therefore when transferring from one to the other you would expect to see a cash release of 15% of your total debt book.
Quba are very experienced in transferring debt to our solution from another provider, both invoice finance and traditional factoring. We follow the ABFA procedure for transferring debt and have skilled auditors available at short notice if required.
Our direct personal experience as recruiters means that we understand the impact that a transfer can have and as a result we ensure that your day to day operations will not be affected. The vast majority of the work will be done behind the scenes and your clients will not be made aware until necessary. We provide you with the relevant documentation to hand to your clients at the appropriate time, informing them of your change of funder, subsequently introducing ourselves directly. You have a dedicated account manager and credit controller within our team so the relationships are quickly built with you clients ensuring a seamless transfer process.
If you are interested in learning more about how to transfer your funding provisions and why Quba could be the right fit for you, please call our office on 01305 233178 for a confidential discussion.
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