HR businesses report rise in factoring

22/07/2010

The use of factoring as a cashflow funding tool is on the rise in HR businesses, new research has revealed.

New business instructions are on the up, says Touch Financial, an independent broker and part of the SFP Group, which has released figures showing that the number of deals closed has risen dramatically in the past three months and now represents more than a fifth of all new business enquiries. This sharp increase has been attributed to a change in strategy by banks to encourage customers towards factoring.

Simon Carter, director of Touch Financial, said, "Factoring and invoice discounting have traditionally been popular cashflow funding tools for HR businesses and indeed many could not survive without it. What we have noticed in recent months, however, is the number of deals closed has risen significantly.

"This might suggest to us that banks have more of an appetite for factoring rather than traditional lending or overdraft. It might also suggest that HR firms are more actively looking for funding to expand,” he added. Due to the primary asset of an HR business is its sales ledger, this type of business is especially suited to factoring.

"If a business should fail, the lender can get to the ultimate customer more easily and therefore there is less risk. The net result is that banks are prepared to agree a higher advance, sometimes as much as 85-90 per cent, and this is well above the industry average. A greater advance means more money to invest, and the greater the opportunity to grow,” he added.