Invoice Finance is often a necessity for contract recruiters to be able to pay contractors before they are paid by clients. As you will have to sign up for these facilities for a certain period it is important to understand some of the hidden charges that some companies have. They may not be obvious from the initial quotation documents are and often within the main contract documents.
Below I have included a selection of charges that TBOS have seen some invoice finance companies try to charge agencies over the years:-
- Funding Facility Increase Charges – These charges are when you need increase your agreed overall funding limit as you are doing more contract business and need further funds. To increase the funding this will be charged at a percentage of the increase amount but considering you are doing more business and spending more service charges this can seem like a double charge.
- Drawdown charges – This is the bank charge for drawing down the funds from the invoice finance company to your bank account. Often BACS transfers will be free but same day transfers can be expensive. Also, invoice finance companies will charge same day transfer fees for all currency drawdowns as they cannot do free BACS transfers on currency accounts.
- Renewal Fees – This is the charge when your facility comes up for its end of sign up period i.e. 12 months. If your facility is remaining the same as the previous period then this can be seen as an additional charge for keeping the same facility. It is always recommended at the end of the sign up period that you try to renegotiate the fees to make this renewal charge worthwhile.
- Debenture Charges – This charge is often charged at the beginning of your arrangement to log the All Assets Debenture at Companies House. This charge is often on top of any set up charges and can double your set up costs.
- Cheque Receipt Interest – This is an interest charge when invoice finance companies provide you with funding when they have received funds by cheque. However, some companies will assume that all transfers received are by cheque and will charge you 2-3 days extra interest on all payments received even if they are electronic.
- Audit Fees – This charge is to allow the invoice finance company to come to your office and check your books but the frequency of the audits each year is dictated by the invoice finance company. If they decide you need one each month then this can be a very expensive fee over the period of your facility.
- Communication Charges – This is an additional charge for every time invoice finance have to send you a letter or variation to the agreement. It is often advisable to address all changes in one letter to reduce these charges or ensure you know these charges before the letter is raised.
- Trust Account Fees – This is a charge based on the amount of money overdrawn within the trust account on a daily basis. This would be based on what looks like a small fee on the paperwork (eg. 0.06p per £1000) but can add up to thousands over a year.
- Exit Fees – This is the fee to get out of your invoice finance arrangement even if you are at the end of your sign up period. Some companies will not even provide specific details of this charge in their agreement so as to try and justify a larger exit fee to cover any additional costs.
TBOS works with a number of reputable invoice finance companies and can ensure that these fees and charges are not charged or are explained before they occur if they are necessary.
Fund My Contractor does not have any of the fees shown above (except same day drawdown fees) and can help provide you with invoice finance on your contract positions at a lower cost. Get in touch today on 0845 881 1112