Social Care Temporary Recruitment Dealing with Service Providers
Facility: £1,250,000 Confidential Invoice Discounting
Our client provides social workers to local authorities. They had an invoice discounting facility in place with a well-known bank which was proving expensive and but more importantly restrictive.
Fees – Why You Should Review
The fees had not been reviewed for years and during this time the turnover had increased dramatically. One of the main variables when calculating fees for invoice discounting is turnover and typically the higher the turnover the lower the percentage service fee should be. The invoice discounting service fee had not been adjusted as turnover increased and as such the facility was hugely over-priced. This was a real shame as other lenders had contacted the prospect who had turned them away in an attempt to stay loyal so in this instance loyalty is
Restrictions on Funding
The overall facility limit was well below where it needed to be which seemed strange given the client had a great business. Every time he applied for an increased limit he was charged and the limit put in place would only be sufficient for a month or two before it was restrictive.
Our client was also invoicing service providers such as Comensura, DePoel and Matrix SCM. The existing lender had concern about the potential ‘pay when paid’ clauses in the terms and conditions. This can be an issue for some lenders and as a result some invoice finance clients.
We provided a huge saving on the fees with a reduction in overall costs of 42%!!! This represented a saving of over £31,000 which effectively will go straight on to bottom line profit for our client.
Increased Funding Line
In reality our client only needed a £900,000 facility limit but do to rapid growth and previous restrictions we thought it was prudent to negotiate a £1.25m facility to accommodate his growth plans. Importantly we also selected a lender that can comfortably increase the facility well above the £1.25m to accommodate the clients long terms growth plans.
Increased Cash Generation
The facility had historically been restricted not only by the overall facility limit but also by caps on service providers and also individual funding limits provided against these service providers. A specific example would be that we were able to provide an increased individual debtor limit on Matrix SCM from £200,000 to £400,000.
A concentration cap of 30% had also caused funding restrictions and we were able to increase this to 50% when in reality the client only needed 50%.
As you can see we work with clients to understand their requirements and then structure a facility to meet those needs. We focus on both structure and costs and our aims are to maximise cash generation and minimise costs.
With this client we were able to increase overall funding by focusing on the overall facility limit, individual debtor limits and any restrictive caps in place.
Along with increased funding and the removal of restrictrions on funding we also provided a 42% cost reduction.