How to Change Invoice Finance Companies

How to change invoice finance lendersYour business may be using some sort of invoice finance, may it be invoice factoring or invoice discounting and looking to change lenders.

If you are one of the uses that is looking to more your invoice finance facility to another lender but not sure how to do this we can help.

As a leading broker in this space we can help assist you to find a new provider that fits your businesses sector. Many businesses believe that switching invoice finance providers will be difficult and time consuming.

How do I change my factoring company?

To change your factoring company is really simple, the first thing you need to do is serve notice that you with to terminate. Factoring companies will require written notice to terminate the contract.

Factoring companies have a standard termination notice period of between 30 – 60 days prior to the renewal date.

Looking to change Invoice Finance Companies

Maybe there are a number of reasons why you might consider switching to another Invoice Finance provider. The level of service could not be what you had been promised, or simply you maybe experiencing rising costs. This said you may feel that you could get the service more cost-effective elsewhere.

The two main reasons in our experience why you might be hesitant in switching providers are:

  • You feel that is a time-consuming process and lengthy overall
  • You are still within a contract period and as such you will be charged if you leave.

Inform your Factoring Company you’re changing

Once you have made up your mind that you are changing or even considering changing your factoring company, this first thing to do it to inform them. The encumbered factoring company you presently use may come back with an improved factoring deal.

If you still wish to leave you need to serve notice on the provider that is is your wish to cancel the agreement and leave by serving notice on them.

Review the Costs of your Finance Agreements

Should you wish to terminate your agreement with the invoice finance lender you maybe required to pay a penalty charge to change providers. This needs to considered when looking at other deals, they termination costs may not be worth it overall.

Switching companies can be a difficult process sometimes and some people do not like change but if you feel there will be major benefits of using a new factoring company, and this would far outweigh the costs of changing factors, then you should proceed with the process.

Hassle to change Factoring Company

There are a number of reasons why businesses change invoice finance providers, maybe a breakdown of a relationship between client and lender, or simply there is no need for the service and the business is self funding.

The process of switch invoice finance providers has been made easier over the years with the use of technology. In reality businesses have been switching providers time and time again over the years, to ensure that they get the best rates available.  This process is now very quick, simply and relatively pain free.

What is involved in the process?

Both lenders, the outgoing and incoming will complete the majority of the transfer between themselves. This leaves the business owner to get on with their day to day business activities.

The incoming lender will complete a due diligence on the business and the book debts. Once everything meets their criteria the lender will issue an offer letter. Once the business owner has acceptable the offer then the transfer process can begin. The incoming lender will make contact with the outgoing lender, at this point they will agree a date for the transfer to complete. The transfer of the finance facility will be managed by the two lenders on behalf of the business.

A funding calculation will take place by the incoming lender on transfer day. This is where they will work out how much they can generate from the debtor book on that specific date. This calculated will be used to repay the outgoing lender. Any residual balance that is left will be placed into the businesses new facility for future use.

When changing factoring companies you need to be aware that you are responsible for paying any charges such as survey costs. This process is called ‘Change Factoring Liftout’.

Costs to change Lenders

If there is any outstanding fees to the old lender, one way to over come this is to submit new invoices to the new factoring company. These can be used to payoff the outstanding invoices at your old factor. There would be no additional cost to make the change to a new lender then.

Some factoring companies offer reduced fees on old invoices which are part of a buyout this is dependent on the size of transactions. Meaning if they lift out a facility they may only allow 50% on old invoices you have already submitted to your old lender.  Notice of intent to terminate should be given at the earliest opportunity to your old factor to avoid any early termination fees, if you are leaving their contract prematurely

How long to change Invoice Factoring lenders

If you are changing from one invoice factoring lender to another lender the whole process can take 14 working days. This is two to three days longer than setting up a normal factoring application setup process.

The additional days are needed for the new lender to carry out invoice verification, as well as on the day before lifting out carry out their liftout calculation that needs to be sent to you for your approval.

Need help to change funder?

If you are a user of any type of invoice finance, such as factoring or invoice discounting and looking to change providers, we can help you through the process.

Simply complete the online enquiry and use our 15 years of experience for free!

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