Company Loan Facility

[JoJoGabor]

I am talking to a potential client direct, and they are suggesting I go through an agent just so I can get paid at regular intervals as they will only pay once the contract is complete. Now I'm loathed to pay an agent 10% or so just for a credit facility.

Ignoring why my warchest is not big enough to cover 6 months, and ignoring any risks over non-payment, is there some sort of loan facility I can use to cover me for 6 months that costs less than the 10% or so an agent would charge for the facility

[MrRobin]

Use of an agency for payroll / factoring ONLY usually only costs 4-6% of the rate, HOWEVER, in your case of 6 months until the client pays is likely to put any agency right off. Why has the client said they will only pay at the end? This would ring alarm bells with me, particularly if it was a small company as they may have cash flow problems.

If you can find an agency that will do it, make sure you are clearly opted IN as you will then still be paid even if the client doesn't cough up

As for the loan facility, I reckon you'd be better off with a personal loan instead.

[davetza]

I am talking to a potential client direct, and they are suggesting I go through an agent just so I can get paid at regular intervals as they will only pay once the contract is complete. Now I'm loathed to pay an agent 10% or so just for a credit facility.

Ignoring why my warchest is not big enough to cover 6 months, and ignoring any risks over non-payment, is there some sort of loan facility I can use to cover me for 6 months that costs less than the 10% or so an agent would charge for the facility

This is not going to work. The agency are going to want payment terms of 14 - 30 days on any invoices sent in especially if they have not dealt with the company before and they will send an invoice a minimum of every month. The only way around this MIGHT be for the agency to raise a PO on the company for the full amount but I doubt that would happen.

It would be better if you and the company could work out some payment milestones based on project deliverables but again I would not be happy doing this unless you had some commercial experience doing something like this before. I would really question why this potential client of your is doing this as it is not standard practice for any business relationship to work this way. At a minimum most companies would bill every quarter.

[Wanderer]

Ignoring why my warchest is not big enough to cover 6 months, and ignoring any risks over non-payment, is there some sort of loan facility I can use to cover me for 6 months that costs less than the 10% or so an agent would charge for the facility

Not for your company, no. And if you took out a personal loan then you still have to pay it back even if the client doesn't pay.

The 6 month payment terms are nonsensical though. No business is going to accept that, tell them to be reasonable - payment monthly based on progress towards the goal. Would you really do 6 months worth of work and risk having the client company go bust or refuse to pay you? You would have to be barking mad.

And as davetza says, no agency will accept those payment terms either because they aren't stupid.

[JoJoGabor]

Ok got it down to 1 month in arrears, billed weekly. Which is fine.

Now, going direct my PCG+ membership and its agency failure benefit is irrelevant, is there another insurance available for client payment failures?

[Clare@InTouch]

Ok got it down to 1 month in arrears, billed weekly. Which is fine.

Now, going direct my PCG+ membership and its agency failure benefit is irrelevant, is there another insurance available for client payment failures?

I'm not sure about insurance for non-payment, but you could look at invoice factoring. It would cost you, but you'd effectively 'sell' the debt to someone else.

If you're 'opted in' the agency also has to pay you even if they don't get paid themselves I believe. Opt in, opt out? What the employment agency regulations are all about :: Contractor UK

[JoJoGabor]

Thanks Clare, looks like Invoice factoring would cost me between 5% and 10% - I think I'll give it a miss. I'll credit check the company tonight and download their accoutns from companies house, and go from there.

As there is no agency I would assume the regulations don't apply.

The company is a mid-tier reputable consultancy, but just being paranoid.