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Transferring Invoice Finance Providers

Transferring between invoice factoring or invoice discounting providers is fairly common place. The reasons for moving can include pricing, service levels, a change in a lenders criteria and outgrowing the existing provider.

The process of transferring is called an ’interfactor transfer’ and this is a controlled process that the lenders process under the guidelines set out by the Asset Based Finance Association (ABFA)

The process usually starts with you the client sourcing a new provider. Once you have decided to leave and are happy that you are in a position to do so you must give notice in writing to your existing invoice finance provider. When doing so it is important to understand what your obligations are in terms of your minimum contract period and the notice period that you must provide. If you are looking to leave early then you will almost certainly incur termination fees albeit these can often be negotiated.

The new lender will effectively pay off your existing invoice finance provider so it is important that the facility is structured properly so that enough cash can be generated.

Once everything is set up and the transfer date is nearing both lenders will communicate and exchange letters. It is also standard procedure for an ’interfactor reference’ to be taken. This gives the new lender an opportunity to ask questions about the conduct of the account, etc.. This is where a lot of transactions fall down because the full picture has not been communicated to the new lender.

In our opinion if you are looking to transfer between lenders there are a few things to consider:

  • Have you got a real understanding of the costs? Headline rates can look attractive but will you really be saving money?
  • Will the new facility generate enough cash? You need to look beyond the prepayment percentage at individual debtor limits and concentration limits.
  • Have you been totally honest with the new lender? Remember a reference will be taken from your existing invoice finance provider.
  • Remember to check your contract to see when you can transfer and what notice period is available.

If you are considering a transfer and want our advice please call us on 0845 863 0738 or email us.

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