Article Understanding & Comparing Factoring and Invoice Discounting Quotations

This article covers the structure and some key considerations when reviewing and comparing a factoring or invoice discounting quotation or quote. These may also be referred to as the "offer" or "offer letter" or "facility letter".

WHAT IS A QUOTE / QUOTATION?

When a business is considering using factoring or invoice discounting it is often the case the directors of the business will contact one or more factoring companies (also known as factors) in order to obtain quotations. A quotation (or quote) confirms the structure of the deal that the factoring company are prepared to offer, both in terms of the cost, in terms of the financing or funding package and any additional security that the factor is intending to take.

KEY CONSIDERATIONS WHEN RECEIVING & COMPARING QUOTES / QUOTATIONS

There a number of considerations when comparing what we tend to collectively refer to as "quotations" or "quotes".

First is the legal significance of the document that the factor has provided. In some cases an offer "in principle" is made. This can often be produced by the sales person and really only serves as an indication of the structure of the deal that the factor is prepared to offer. In many cases, the production of a formal quotation or offer letter comes further through the process. Even so, the quotation or offer letter may not confer any legal obligation on the part of the factoring company (you should seek legal advice from your solicitor to be sure about the legal status of the document you receive). Indeed in many cases the offer letter only forms part of a much more comprehensive legal agreement which specifies exactly how the facility will operate.

The second issue is understanding the various components of the quotation.

FACTORING & INVOICE DISCOUNTING TYPICAL QUOTATION CHARGES

Firstly, there a