A case history Factoring for Construction Industry
We were approached by a company involved in the construction industry with severe cash flow problems and needing to raise funding from the £60,000 outstanding debts.
Although not the easiest or glamorous of factoring deals, we introduced one of the more flexible factors who had a close look at the business and found that the outstanding debts were full of disputes and retentions and that only £15,000 of the total was factorable.
As it seemed clear that this company was insolvent due to the huge amount of outstanding trade creditors and that the clean debts of £15,000 wouldn’t provide sufficient funding to save the company, the factor declined to offer a facility.
We were somewhat shocked a couple of weeks later to hear that this company had been offered a facility by one of the high street bank factoring companies. The level of funds provided would have been insufficient to stave off action by the creditors and the additional burden of factoring costs would have just served to hasten the demise of this company. Caveat emptor.
Postscript – As expected this company didn’t continue trading for much longer.