FAQ

• Proven track record since 1988
• Successfully assisted more than 3,300 businesses with working capital funding to date
• Owned and managed by entrepreneurial businesspeople for businesspeople
• Personalised and par excellence service further supported by wealth of expertise knowledge

• Invoice factoring or receivables financing is the best suited form of raising working capital effortlessly, yet the most misunderstood.
• It is by far one of the most effective ways that a business can unlock funds tied up in its debtors’ book.
• Invoice factoring gives the business the ability to draw cash back into the business before the customer pays.
• Up to 80% of the value of an invoice can be paid by Merchant Factors on presentation of the signed invoice, with the balance being paid as soon as the customer settles the account in full.

Those in trouble or those in a growth phase? 

1. Invoice factoring might be a solution for financially distressed businesses, but is increasingly being used by businesses that wish to maintain a stable and strong cash flow. By opting for an invoice factoring facility from Merchant Factors, it demonstrates that the risk of outgrowing cash flow reserves have been mitigated.

2. The truth is invoice factoring is not only easy to understand, but also great for small businesses who want financial stability and cash flow at their fingertips.

Those that allow and forfeit excessive discounts

1. Better cash flow means more negotiating power with suppliers. Bulk settlement discounts reduce the overall cost of goods to the business, margins improve over time, and the savings may even cover the costs of the factoring.

2. Some businesses entice their customers to pay early by affording them up to 5.00% settlement discounts. When you go the invoice factoring route, you can do away with this unnecessary expense as you obtain your funding sooner and at a fraction of the discount allowed.

Those that are outstripping their cash reserves and funding lines

Conventional overdraft facilities are based on the value of bricks and mortar and does not grow with your turnover.

Nominal value which commercial banks place on debtors ranges between 20-30%, whilst we advance 75% against the same security on offer.

In a fast-growing business the cash requirement is likely to be high to pay for materials or services before receiving payment from customers. The overdraft has no flexibility to accommodate growth.

If growth is allowed to a level where the cash requirement line crosses the overdraft line, the business could experience a cash flow crisis even though it is financially successful.

The funds available from Merchant Factors increases as turnover increases, thus avoiding the potential cash flow crisis. 

Those that wish to outsource the credit control and collection function

If you have our professional debtor administration team taking care of your accounts, it means your senior staff spend less time dealing with collections and more time generating new business. Less overheads are expended on managing debtors, meaning the bottom line consistently improves.

Merchant Factors’ analysis of delinquent debtors will help you to prevent losses and bad debts, as well as facilitating the early identification of high-risk debtors. We work closely with all the major credit bureaus and debtor insurance underwriters and act on their timeous advice.

We offer real time online reporting to you as a supplier where you can download and monitor all the debtors’ management reports. Unlike your conventional accounting software that only covers the basics, we provide you with comprehensive informative reporting for split decision-making.

For any factoring institution that wants to be successful, it is vital that the relationship between a business and its customers remains positive. A reputable company strives to treat customers professionally and respectfully so they can build on their relationship with the business.      

Whether it is through a bank or a factoring company, businesses use financing to enhance their business and support their growth. Customers generally want to know that a business has sufficient capital to meet their needs. They also know that most businesses use financing to access capital. For many businesses, it is a better financing option because it is more responsive to its needs.

You do not have to factor all your debtors. You could choose the ones that either put pressure on your cash flow or the ones where you see the biggest growth potential. Whilst you may choose which debtors to factor, you are of course then obliged to factor all the invoices for that customer. This avoids accounting inaccuracies and inconsistencies.

Merchant Factors charges an administration fee plus a discount or interest rate which is agreed to with your business upfront, depending on how the service is structured, the volumes of invoices and the overall creditworthiness of the customer base:

• The interest rate ranges from between 2.0% and 3.0% above the prime lending rate on funds that have been advanced until the invoice is settled by your customers
• The administrative fee ranges from 0.5% to 2.5%