Case Studies

The Right Approach - Invoice Factoring

Background
Pippa Scott and her husband Jason started Scott’s Commercial Services in Didcot 14 years ago. The company repairs the curtain sides used on vans and lorries to keep loads safe and dry.

Pippa enrolled on an accounting course to learn the necessary skills to run the back office, while Jason was on the road undertaking the repairs.

In more recent years, the company has branched out into mechanics and Pippa and Jason now have two curtain repair vans and two mechanic vans, covering repairs 24 hours a day with a great number of rental companies on their client base.

Problem
Despite business being good, as with many companies, when the recession hit, cash flow became tight for Scott’s Commercial. The Scotts had been with the same bank since setting up so their immediate thought was to turn to their bank for help in improving the situation.

‘Because of the suddenness of the downturn we just could not get the money in quick enough,’ Pippa explains. ‘I was on my own and covering everything and, frankly, just could not cope. We sat down and decided cash flow was our biggest problem. We spoke to the bank and they offered various services including factoring of invoices which seemed like it would take the pressure off.’

However, things did not go according to plan. ‘After a while we noticed that we, to be honest, had to do all the chasing and the majority of the work. Cash flow did improve but we felt that was down to the work we were doing rather than what the bank was doing.’

In 2015 the company moved offices. It was at this time, with the process of moving, that Pippa did a full audit covering all their incomings and outgoings over the last three years. ‘It was necessary, but in a way I wish I hadn’t because it was quite scary. The cost of the factoring was a very high expense and it really brought home that it was not providing a solution to the problem.

‘Our accountant had just been to a seminar at which Cranfield Business Finance had spoken. He suggested they came in to have a look at our operations and that is how we first came in contact with them.’
Cranfield Business Finance provides a service to clients seeking funding solutions. With access to the whole of the lending market through its membership of the NACFB, the company is able to offer impartial and practical guidance on a range of financial products.

Pippa worked with Alan Jones at Cranfield Business Finance. ‘Alan was very good because he forensically analysed everything, and did not impose his view. He presented all the facts so we could make a very clear and insightful decision.’

Alan agreed with Pippa and Jason’s earlier decision that factoring was the way forward and, after analysing all the figures, concluded that it was not the product itself but the type of provider that was inappropriate.

Alan comments, ‘The model should have worked. The company’s situation was well suited to a factoring service but, after looking at the way it was working and the options open to the client, we decided that the approach was correct but it had not been done in a way that suited the client.

‘Quite understandably the client was not happy with the service it was receiving and that had coloured judgement on the product, but once we had taken everything into account we were able to show that factoring was the way forward.’

Cranfield Business Finance used its market knowledge to source a factoring company that specialises in the service rather than offering it as part of a suite of services.

Pippa and a colleague interviewed two providers across a day before settling on their final choice. ‘Once we said yes to them, they wanted to really go over our books before moving forward. We made sure that everything was available to them.

‘After the first day it was clear to them that we knew what we were doing and they said they would offer to go full non-disclosure, which makes everything so much simpler and straightforward and underlined the faith they had in us.’

Outcome
‘We do all the chasing and all the work,’ says Pippa, ‘but on a daily basis we have a sales ledger where everything has to balance, and then at the start of every month we send in our reports just to show that everything is as we said it was, and they finance against that.

‘We started at the beginning of the year and I have to say that it has made an astronomical difference to the business. I can get on doing what I am paid to do whereas before I had felt we were paying for the bank to do a service and if they had been an employee I would have dismissed them.

‘We have remained with the bank and that relationship on the banking front works just as well as it has done. I now deal with the cash flow entirely and have a complete eye on it which makes it so much easier. We have never had a phone call with our provider at all to raise any concern. It’s been wonderful. I used to feel that I was in here all hours bashing my head against a brick wall and having to fight people all the time. The level of factoring is coming down regularly and our aim is to be off the service all together.

‘Alan regularly picks up the phone to check if everything is ok and working well. He does not have to do that and it is not strictly part of his service, but he genuinely cares about how we are doing and that really matters to a company like ours.’

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Recruitment Company

PRODUCT SOURCED: INVOICE FACTORING FACILITY 

This was a start-up business with no track record which required an invoice finance facility to provide cash flow funding as well as essential back office and payroll support. 

After meeting with the client, lenders were identified who would provide the necessary product solution. Due to the normal constraints on a start-up, Cranfield was also successful in negotiating a low cost product, also managing to secure a facility with no monthly minimum fees for an agreed period.

Manufacturing Company

PRODUCTS SOURCED: EFG LOAN, TRADE FINANCE FACILITY, CONFIDENTIAL INVOICE DISCOUNTING FACILITY

The client required finance to facilitate a Management Buy Out (“MBO”) and assist with the company’s anticipated growth potential.

Having been approached by the client’s accountants, Cranfield identified the appropriate finance solutions before sourcing both an invoice finance facility and an EFG loan from a mainstream bank at preferential rates. In addition, and to service the company’s overall funding requirements, a trade finance facility was also required. Due to the complexities of the supply chain, mainstream funding was not available. Cranfield was able to source an independent trade finance provider who provided 100% finance for their supplier transactions.  

Care Home Company

PRODUCT SOURCED: PEER TO PEER SECURED LOAN

The client’s current facility was not working and their bank had appointed an LPA receiver on one of the company’s properties. Initially the client sought assistance from our sister company, Cranfield Business Recovery (“CBR”), who specialise in corporate recovery and insolvency.

After meeting the client, CBR identified that the company could avoid formal insolvency proceedings through re-financing one of its other properties. Having evaluated the financial position and assessed what the market had to offer Cranfield secured the swift and timely completion of a loan through an independent lender that specialises in peer to peer funding.

Construction Company

PRODUCT SOURCED: SINGLE SELECTIVE INVOICE DISCOUNTING

This business had cash flow issues with working capital committed to financing trade debts and applications. The client had previously tried to secure an invoice finance facility but concentration issues was a major concern.

The client approached Cranfield after seeking assistance online. Having gained an understanding of the client’s business objectives the client was advised that a single selective invoice discounting facility would provide the necessary funds. Cranfield reviewed the market and sourced an online invoice finance provider, setting up a facility for the client within a week of submitting the application.

Land Owner

PRODUCT SOURCED: BRIDGING LOAN

Our client obtained planning permission for 120 dwellings on land that he wished to dispose of to an experienced developer. However, the proposed sale of the site was frustrated by his commitment to acquire an adjacent strip of land from a third party that provided additional access.

Due to the high loan to value of the security available Cranfield contacted one of the members of its high net worth panel (HNW) who has experience with situations of this nature. After meeting with our client on site the HNW offered to facilitate the necessary purchase.