As the credit crunch starts to bite are all your eggs in one basket?
When speaking to businesses about invoice finance they sometimes say that they would prefer to keep their factoring or invoice discounting with the same bank that handles their overdraft and banking requirements, as it is easier. Similarly, there is often pressure from the large banks for a business to use the bank's own invoice financing arm.
All the time that things are going smoothly within your business that may not cause any problems but if the impact of the credit crunch causes your customers to slow down their payments affecting the financial performance of your business, it can make life even more difficult for you.
The Risks of Banking With Your Invoice Finance Provider
Those of us that have worked within the large bank backed invoice finance companies, with clients that get their overdraft and their invoice finance from the same bank (eggs in one basket), can recall situations where the client's bank manager has called us, the invoice finance manager, and asked us to reduce the client's invoice finance prepayments because the overdraft monitoring figures have deteriorated and the bank wants to control its overall exposure to that client.
The Solution - Spreading Your Risk
The answer can be spread your risk by separating the bank that you use for your overdraft and banking from the company that you use for your invoice finance. In this way, your facilites will not be connected and they can function independently. There are plenty of independent factoring and invoice discounting companies out there that are accustomed to working with clients that have banking facilities elsewhere.
Taking this action early could prevent you from regretting putting all your eggs in one basket later, when unforseen circumstances arise.
Posted: 13th of June 2008
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