We are often asked if it is possible to factor only one or several of a company’s customers, rather than the whole ledger. One reason for this may be that some customers pay very quickly and the benefit of factoring is not as great as for slower-paying customers.
The short answer is: Yes! However, many invoice finance companies prefer for their clients to factor all customers.
The likelihood is that if a business wants to factor only one or two customers, this will mean that the concentration percentage (ie percentage of debts outstanding for any one customer as a percentage of the overall factored ledger) will be high. This will inevitably mean that it is likely that some form of credit protection will be required in respect of the customer. This could be taken out through the factor’s own in-house policy.
One issue which would create a problem for any invoice funder is factoring individual invoices (as opposed to customers) – this would be problematic as clearly the customer would be unsure whether to pay into the client’s bank account or the factoring company’s trust account in respect of each individual transaction.
As always, we are happy to offer our advice to businesses who feel it may be beneficial to seek funding on only some of its customers.
