William Brooks Close founded his mortgage lending service in the USA in 1871. Since then it has changed hands and grown into a financial services supplier. The parent company, Close Brothers Group plc. is listed on the London Stock Exchange, where it is also part of the FTSE 250.
In 1984, Close acquired a factory company from Yeovil, and within ten years it was trading as Close Invoice Financial, Ltd. The company provides factoring services for over 1,000 clients in the UK, Ireland and Germany. For the last three years, Close Brothers Invoice Finance has been awarded, ‘Best Factoring and Invoice Discounting Provider’ by Business Moneyfacts.
Close Brothers Invoice Finance is a reliable mid-level factor. They will release up to 90% of the value of unpaid invoices, within a couple of days of you sending them to the client. Close then collects the invoice amounts, and returns the remaining 10% to you – less fees; essentially they handle all payment collections from your clients.
Should Close Brothers Invoice Financing take a company on, they take on all their future invoices. They are wholly owned by Close Brothers merchant bank, but still function semi-independently – so there is a degree of flexibility to their decision-making, combined with the strength of having a major bank behind you. They will contact clients and chase payments, so your company will be relieved of that kind of administrative load.
Flexible Funding Levels
The funding available via invoice factoring will vary in relation to your company’s turnover – so it will grow as your company grows. Close Brothers Invoice Financing is not involved in the small business market, but opts for clients in the medium to large categories. There is no upper limit to the size of the companies that Close Brothers Invoice Finance will deal with.
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Any Close Brothers Invoice Finance client will have a personal relationship with their Client Manager, and that manager will make two site visits a year. Many factoring clients coming from other companies are surprised - having never had the opportunity to meet the person they are dealing with. Seeing a business in operation can make a real difference to a factor’s understanding of how solid it is, and given that Close Brothers Invoice Finance has a Merchant Bank parent company, a direct line to the underwriters, they can make good use of this extra information. Close Brothers have a client retention average of 6 years, with over 100 of them reaching the 15-year mark. Highly favourable when compared to the industry average of three to four years. Good retention is one of the strongest indicators of the solid service Close Brothers provides. Staff retention is also excellent.
Close Brothers Invoice Finance has excellent capitalisation – meaning that they have money behind them. This is because Close is a cautious lender – betting only on sure things. If your company is looking for a way out of trouble, then Close are unlikely to take you on.
Like all UK factors, the company selling its invoices to the factor needs to be UK registered. Close specialise in working with companies with an annual turnover of at least £250,000 but won’t generally open a book unless the company seeking factoring has at least £50,000 outstanding on its sales ledger. Only business-to-business companies are eligible, and the company must be willing to hand over all its invoices for factoring. Prior to accepting a factoring client, Close will vet the larger debtors, and a random sample of the smaller ones, in order to ensure that the debt is essentially collectable.
What Business Model do they Suit?
Each business is assessed on its own merits, however they do have a lot of experience in the following sectors: recruitment, transport, haulage, manufacturing and engineering, wholesale and distribution and some food and drink. Generally Close Brothers Invoice Finance are better for well-capitalised companies at the medium to large end of the spectrum. Close will look at a company holistically – in a way that the bank cannot, studying the business’s objectives as well as just turnover and sector. Direct access to the underwriters means that funding decisions are all their own. Close Brothers Invoice Financing like long–term client relationships, and are suitable for a steady business that is established and has grown to a medium to large size.
Invoice Finance has differing levels of cost, depending on the size of your company.
The service charge on a facility of less than £2m is 0.5% – 2% of turnover. On facilities of over £2m, it is 0.1% - 0.4%. This covers the ongoing facility and will, of course, be tied to how much business the company is generating. The service charge may have additional credit control charges and payment for bad debt protection.
The discount charge – the money charged on factored invoices, is calculated daily as 2.5% - 3.5% over LIBOR, no matter the amount. LIBOR is the London Interbank Overnight Rate, or what banks charge each other for unsecured funds.
In many of their introductory deals Close offer 6 months free bad debt protection, so it is worth negotiating this one.
Help and Support
Close Brothers Invoice Finance has several offices throughout the UK, and one in Ireland and Germany. Site visits, ongoing customer relationships with dedicated support staff, are a keystone of their client service policy.
However, there is also a modern bent to relationships. Close has a Twitter presence, which can be an excellent resource, for instance: within hours of the latest Budget, there was a link to a report on how a medium-sized business would be affected. They treat their factoring customers like merchant banking customers.
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