1999 the Brumark case

Posted by on December 31, 2008 under Loans | Be the First to Comment

1999 the Brumark case
In 1999 the Brumark case changed the banks view. Anyone interested in the detail of the case can no doubt find it on a web search but essentially unless separate bank accounts were used, the banks priority over debtors afforded by the fixed and floating charge could not be upheld.

Invoice factoring has been around for a long time but Brumark case made it the only effective way of funding with a debtor book as security.

There are various versions of this type of funding ranging from Confidential Invoice Finance through Invoice Finance to full Factoring service. Confidential Invoice Finance is a means of raising funds on the debtor book whilst you continue to manage the ledger and collect your debts as they become payable. Your customers will have no knowledge of the arrangements you have made. Invoice finance generally requires you to notate your invoices with the fact and full factoring results in the money being paid into the factoring company account.

The workings of each are slightly different but the effect is the same. Up to 85% of the debtor book can be drawn down. What is actually allowed will depend upon the perceived quality of your debtors the normal level of credits given by your company and how good the controls within the company are considered to be. Your draw down facility will be reduced to take account of any reciprocal trading, concentrations of trade, and any trade with a customer above and beyond the credit limit considered appropriate by the factoring company for that customer.

Asset finance and stock finance

Posted by on December 25, 2008 under Loans | Be the First to Comment

Asset finance and stock finance
You should ensure that you have sufficient daylight in your arrangement to cover reducing invoicing rates to the extent that this may occur. Similarly if you have used this funding method to make a purchase of an asset you should be careful about the cover levels you have. If your invoicing rate declines so will your funding availability. You have, however, already spent the money on the asset.

Asset finance and stock finance etc are variations of secured funding and are methods of making clear the specific assets over which the funder has priority. Pursuing these may require deeds of priority to be drawn up if your bank has a fixed and floating charge. This is not usually an issue provided there is sufficient total security to cover the total funding required.