New No-Lock in Contract Option When Refinancing to a Bank Overdraft
Here is another change to Debtor Finance product terms that you might find handy.
What is the Change?
Clients can now use our finance facilities without an effective lock in contract. This means that you can sign a 12, or 24 month cashflow or trade finance based facility with us and you can terminate our facility at any time without cost.
There is a catch.
The contract can only be terminated (without cost) should you as the client be refinancing to a bank overdraft facility of the same limit or more. Of course this early termination option does not apply when you are refinancing to another debtor, cashflow financier or cashflow based finance facility.
Why make this change?
Most debtor and invoice financiers lock clients into contracts for many good reasons:
- Allows financiers to spread the cost of upfront administration and risk across a longer period, this benefits both the financier and the client.
- The cost per invoice is a fraction of the cost of a spot factoring type of contract. It makes it an easier, more digestible purchase for everybody (client included).
Here is the problem, if we are calling a spade a spade , cashflow secured facilities are slightly more pricey if you could compare them to more traditional bank overdrafts (assuming you can get an overdraft, otherwise pointless comparing).
This means that some clients really only need to use debtor finance as a short to medium term solution, at least until they can get themselves back to a bank facility. This may only be a short period of time. It could be as short a period as 3 months.
That is the reason we are introducing a “Bridge to Bank” option for clients.
- If a client is more suited to being financed by a bank overdraft, then they can opt to go with that solution. Having a flexible debtor finance facility with zero termination fees takes the risk out of signing up for a debtor finance facility.
Who will benefit most from this type of facility?
- Clients requiring a quick injection of working capital while getting their accounts ready to present to a banking institution.
- Clients needing more certainty of obtaining the best possible finance solution at the best price should an overdraft become available.
- Clients that are not quite showing the metrics a bank needs to meet their servicing requirements. They may be heading in the right direction.
Some final notes and points to consider.
AR Cashflow has long accepted referrals from major banks where assistance could not be provided within the banking system. This change really is in support of this relationship. Consider the following:
- Clients need support when in high growth periods. However, the support needs to be flexible should conditions change.
- To date bankers have understood that our services are not in competition with theirs. In fact, both bankers and clients can now see that the risk (of client loss) when referring to AR Cashflow is extinguished as the door is wide open for clients to return when ready.
When does this take effect?
This will take effect across all new clients until further notice.
Want to know more about this change or why we are changing? Call me in the office on 1300 652 158.
*conditions apply check facility agreement for terms.