Cyberbore's Blog

Tales from a Venture Capitalist

Invoice Factoring – the new overdraft?

Posted by cyberbore on 23 August, 2011

Invoice Factoring – what is it?

Invoice Factoring is very simple.

You enter into an agreement with a finance company, usually a bank or a specialist factoring company, such that every time you invoice a customer the finance company give you a percentage of the value up front, typically 70% to 90%.

They then take responsibility for collecting the debt from your customer and when they do so, they pay you the balance – less a fee of course.

This means that you can improve cashflow considerably.

If you are a growing company,  you will need more working capital and Invoice Factoring could be a good solution, since your available advance grows with you.

You can factor both domestic and export invoices.

Factoring companies like to see a good spread in your customer base with no dominant customers.  If you have a dominant customer, they may impose some restrictions.

Invoice Factoring is not the cheapest form of loan, but it is substantially unsecured and  available to most companies without too many hoops to jump through.

What does it cost?

Each case is different, so costs can vary considerably.  We list below the charges you will incur and a “typical” cost:

Set-up fee:  This is a one-off charge and likely to be anything from £500 to £2,000.

Management fee: This is usually a percentage of your invoices and varies between 0.5% to 3%.  The bigger your turnover, the lower the fee.  There is usually a minimum charge, which can be imposed monthly or quarterly.

Interest: If you take an advance, you will likely pay between 1% to 4.5% above LIBOR in interest charges.

Other costs: Factoring companies also make charges if things start to go legal with your bad debts and under some other circumstances.  Normally the total of these charges is trivial in comparison to the main fees above.

Security: You will probably be asked to give a Personal Guarantee for a small amount, typically £5,000, but the main security is the charge over your debtors held by the finance company.

As a percentage of turnover at the low end it will be 2% and at the high end as much as 10%

If you are looking for a factoring company, the first thing to do is shop around.  There are over 50 companies offering factoring facilities and they vary considerably. Not all will be interested in any particular deal and some specialise in certain sectors.

Their contract can seem a bit daunting at first, but when you break it down, it’s not too difficult to grasp.

Key things to look for

Term: Most factoring companies are reasonable about the termination period, but always check.  The banks will often ask for an initial 12 months period, followed by 6 months termination – this amounts to a minimum of 18 months initially.  You should be able to get a 6 month term.  One major bank even offers a rolling monthly termination from day one.

Interest: Try to get no more than 2% above LIBOR.

Minimum charge: This will depend on the expected volume of transactions – but negotiate a quarterly or even annual minimum.  If you have a MONTHLY minimum, in a month you don’t do much, you will get charged for the minimum and you won’t get it back!

Management fee: Anything in over 1.5% is excessive, unless your debtor profile is high risk or requires lots of work for the factors.

Other points

One-off cash boost: Factoring gives you a cash boost once, equal to about 75% of your current debtors.  So if your turnover is £600,000 pa and your average outstanding debt is 60 days (2 months) then your outstanding debt at any point will be around £100,000.

Factoring would give you around a £75,000 cash injection and then you would get your future invoices paid 75% up-front.

This would be a handy sum to invest in growing the business and as growth occurred, getting bills paid up-front would continue to aid growth.

Customer resistance: Some companies are somehow embarrassed by factoring and argue that their customers don’t like it.  This is nonsense.  Most companies will already have several suppliers who use factoring; perhaps they feel they can manipulate you more than they can a finance company…

If it really is a problem, you can still fund your invoices – but it’s called Invoice Discounting.  The technical difference is that you fund the invoices without your customer knowing – but you have to do the credit control, debt chasing yourself.

Bad debt protection: For and additional fee (of course) the finance company will offer you protection against bad debts.  They will be responsible for collection and if the customer fails to pay, they will accept the loss.

This is usually called “non-recourse” factoring, since if the customer fails to pay, there is no recourse to you.

Debt collection:  Factoring companies will often only chase your top 5-10 debtors by default.  Check out the credit controls they are offering and remember the finance company makes money from YOU the longer the debt is outstanding.

Author: David Saul, Director, support2business Ltd. 0871 218 2218



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If at first you don’t succeed…

Posted by cyberbore on 1 July, 2011

… invent jump suits for dogs.

I was walking my dogs through our woods at the weekend, which are bounded on one side by a public footpath.

It’s not unusual to find alien dogs in our woods, since the public right of way is not particularly well fenced – but I was quite taken aback to see bounding towards me what appeared to be a four-legged child in an all-in-one jumper suit!

As this thing got nearer it turned out to be a dog in a baby grow!

My dog Dippy photoshopped into a jump suit.

Now the interesting thing about this is that a few years earlier we were asked to find funding for a start-up company who wanted to manufacture these all-in-one trouser suits for dogs…

I thought the idea was insane. Who on earth would want to wrap their dogs in a boiler suit to take them for a walk. The dog would hate it. The owner would have to be one slice short of a sandwich.

Well obviously somebody would want to… so I went up to the footpath in search of the owner:

A) to see this person on earth and
B) to enquire about where the garment was purchased.

It didn’t take long before I heard a lady calling foo-foo (actually it was Barnie, but if should have been foo-foo in my already prejudiced view of things).

“Very interested in that coat you’ve got Barnie in” I said, ignoring the apologies about invading private land.

“Oh, ” she said, “Actually we bought it online. It’s marvellous, especially on a muddy day.”

Today is not muddy. Score 1 click on the insanity meter.

“Barnie doesn’t get covered in dirt and I can just pop it into the washing machine – the coat, not the dog!” she chuckled “… I’m not that daft!” 2 clicks; 3 and I’m running.

“Are those grab-handles behind the neck and at the tail?” I asked, spotting them as Barnie started to settle down to business.

“Oh yes, I can pick him up without getting myself muddy. Straight in the car and I can wash the coat at home.”  (With the dog still in it?  I wondered.)

Barnie’s business was now going all over the bottom of the coat where it sags.

“Where online did you find it?” I ventured.

“Ah, that’s the thing. You have to know what to search for, then there are quite a few choices” she said with a knowing smirk.

I thought this would be followed up with a bit of useful information, like search for “mad dog owners + baby grow for puppies”, but no, she just smiled whilst putting Barnie’s lead on.

“I must be off”, she said “can’t be late for the Yoga class.”

“You or the dog?” I joked, hoping it was for the dog so I could score 3 clicks and run…

When I got home I searched in vain for the company we had rejected, but to my astonishment I found lots of UK based online websites selling these things.  I really do hope ours was one of them.

Just goes to prove that you should not trust anyone else if you think you have a good idea. Go for it and believe in yourself, there are plenty of mad people out there.  Look at the Twittering Classes for example.

If you are rejected by some smartarse financiers who are too set in their ways, ignore them are try and try again;  there are mad funders too…

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The Enterprise Finance Guarantee

Posted by cyberbore on 22 September, 2010

For many years the Government has offered to gurantee loans to smaller firms where the loan criteria are sound but the borrower is unable to provide adequate security.

Originally the Small Firms Loan Guarantee Scheme, it was renamed the Enterprise Finance Guarantee Scheme (EFG) and in the 2009 Pre-Budget Report was the welcome announcement that it would be extended through to 2011. It is designed to support established and viable companies looking for additional funding or working capital.

The EFG is aimed at SME’s (small to medium-sized enterprises) with an annual turnover from £500k to £25m, and it guarantees the loan by 75%, subject to certain conditions. It’s designed to support those businesses without the security needed to raise finance and the scheme can be a great way to quickly inject working capital into an enterprise. It can also be used alongside other services, such as Factoring or Confidential Invoice Discounting, to simultaneously improve ongoing cashflow.

For those that have no other means of funding, and insufficient collateral to secure a traditional loan, the financial support of the EFG encourages growth and innovation. For viable, well-run businesses, the scheme offers good availability in terms of loan amount, sector eligibility and loan purpose. However, the EFG scheme has put some barriers in the path to lending, notably the “claim limit” and the general lack of promotion by Government.

Access issues

The EFG will exist until April 5th 2011. And this is a very good thing. The EFG offers wider availability in terms of loan amount, eligibility and purpose than did the SFLG. Pinned to the applicant’s viability and their ability to repay, it is a clear and responsible source of cashflow at a time of continued paucity among lenders.

Claim Limit

From the lenders point of view, there are some pot holes to worry about in the scheme. The scheme’s ‘Claim Limit’ – whereby a lender has a default capped at 9.75% of their lending in any one year – has been widely reported. This means there will be occasions where the lender does not receive the 75% guarantee anticipated at the outset. This has undoubtedly affected lenders’ appetite for lending and will continue to do so. Most lenders also expect the borrower to cover the remaining 25% in some way, such as an insurance premium.

The net result of these considerations is that a EFG loan is a little more expensive than a normal loan.

Reaching its potential

However, there are some important issues to consider. For a start, it has been alleged through the media that some banks have been making it harder to apply for a loan through the scheme. If this is the case, we feel it is unfair.

Not Just High Street Banks

However, there are some surprising participants in the scheme on the lending side.   For example, Venture Finance plc, traditionally just an Invoice Finance supplier.

Their MD, Peter Ewan says “As the first independent invoice financier to offer and fully participate in the scheme, lending to both new and existing clients, we feel it is our responsibility to provide businesses with the kind of supportive funding that promotes future growth. We also believe that the EFG needs even greater publicity in order that small businesses know what could be available. It needs to be properly advertised by both the banks and the Government – something that is presently lacking.”  That’s a healthy and helpful attitude.

Banks who want to become “helpful” should take note…

We accept that there is a balance that needs to be struck between lenders maximising the EFG for viable businesses while protecting taxpayers’ money and ensuring that responsible lending is maintained. However, given the current economic climate we would like to see the Claim Limit increased so the full potential benefit of the EFG can be realised by UK businesses.

For more information visit Business Funding

Monkey Island help smaller businesses find funds for a wide variety of purposes.  We can find both debt funding (loans) and equity investments.  For Invoice Finance we offer a cashback deal, sharing the often substantial commissions available from the lenders.

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The Pushme-Pullyou on the Internet

Posted by cyberbore on 14 September, 2010

Or…  Do people buy drills or holes?

(c) Annie Saul 2009

© Annie Saul 2009

The PushmePullyou is an animal discovered by Dr. Dolittle, who is a children’s book character invented by Hugh Lofting.  He shuns human patients in favour of animals, with whom he can speak in their own languages.

The PushmePullyou is originally a Llama -like creature with a head at each end and whichever way it goes one end is pushing while the other end pulls.  My version was invented by my daughter Annie after a recent trip to South Africa.

To answer my own sub-heading question though, I was always taught that people buy holes, not drills.

You wake up one morning and you decide you want some shelves in the bathroom, as you do.  You need some holes to put the screws into so obviously you hive off down to the DIY shop to buy a drill.   However the helpful assistant (obviously you’re not at Focus DIY) asks you what you are trying to do and suggests you look at HolyRoller, a new gadget deigned to create screw holes in a wall, just with one quick roll!

It makes no mess, costs less, works instantly and fits in a matchbox – wow!  After that list of benefits, who needs a drill…

So it turns out you didn’t need a drill, you needed a hole.

So far the makers of this wonderful gadget -“Holed-in-One gmbh” – have not tried to sell direct over the internet.  They have been quite successful in “traditional” marketing, but at great cost.  They produced some leaflets, ran ad campaigns, did mailshots, hired sales people and send them to DIY shops.  They have to pay for all the marketing and then give trade prices to their channel.

All of this is “Push” sales and marketing.  It relies on getting our messages pushed in front of people and telling them how wonderful the HollyRoller is.  We hope people see the advert, don’t throw the leaflets in the bin and agree to see our salesman.  Push.  Pushy salesman, pushy adverts, lots of claims and lots of promises of Hole Nirvana.

“Surely,” says the CEO of Holed-in-One, “Ve should sell zis on ze internet, halve our cost of sales und eliminate ze trade discount.  We’ll ze fortune make!” (Acht, he ist German).

The question is, how would the makers of the HolyRoller market this wonderful gadget on the internet?

They’d better set up a website and do some web advertising.  “” is available.  Let’s use our pushy, snappy marketing slogan “Kill the Drill with HolyRoller!” and get holed-in-one up the SEO rankings to the first page.  Our keywords are obviously “HolyRoller, Hole-in-One, DIY, fitting shelves, drilling holes, dust-free holes, fast holes, cheap holes, fits in a matchbox”.   After all, we KNOW people buy holes, not drills.  These are after all our key benefits aren’t they?

But we have forgotten the lesson right at the beginning of our story.  You woke up one morning knowing you needed a drill and went off looking for a drill.  You did not set out looking for a hole.

The Internet is a PULL medium.  People already know what they want and that’s what they look for.  They don’t know they want a “cheap, dust free, fast hole”.  They want an appropriate DRILL – good enough for the job, right price, etc.  If the brand folks have done their job, they want a Bosch or a Black and Decker drill and they’ll be drawn into price, plug-in vs cordless, etc. type arguments.

They will google for “Drill”, “Cordless Drill”, “Bosch Drill” and pull the information out of the cloud and onto their screen.  They are looking at a time convenient to them and they are ready to buy.

Let’s just list that for emphasis:-

  • Search in their own time
  • Know what they want
  • Ready to buy
  • Influenced by branding

If they are going to pull HolyRoller from the cloud, then these are the requirements we have to meet.  What does this mean?

  1. Our web pages respond to their search (they are looking for Drills not Holes!)
  2. Very quickly confirm they are in a place they want to be
  3. Offer them a clear call to action
  4. Overcome their pre-programmed thought that they need a drill

All the SEO has to be aimed at Drills and even drill brands.  We want somebody searching for a Bosch drill to find us.  The best way to do this is to optimise a page (I said “a page” – google index pages, not websites!)  on our site for this purpose.  Get the narrative right and use the right Title, Keywords and Description.  Perhaps we should change the website to “”  or better “”  When it’s found, we want it to look something like this in Google:

Want to find the best way to drill DIY holes?
Do you want the fastest, cleanest (no dust!) and most cost effective drill you’ll ever buy…

Similarly, if we are going to do Adwords, we need to pull people to the ad by being relevant to their search, then attract them in.

Looking for a Drill?
Learn how to make DIY easy
without an expensive drill.

What have we achieved so far?  We have allowed ourselves to be Pulled by our customer and we have started to qualify them.  They are ready to buy, but are they going to be attracted by the promise of an alternative?  If not, they probably weren’t good prospects anyway.  Now where do we take them?

Not to our Home page, which is a “branding” page explaining and extolling the virtues of our product!  We’ve got them hooked so far, they are intrigued. Let’s not waste that.  We need to quickly tell them they are in the right place – which means we need to empathise again with their original search and again with how we persuaded them to pull us.

What we need is a unique landing page, with an eye-catching headine, finally some benefits and a strong call to action – and to start gently pushing. Something like:-


Learn the Secret drill manufacturers want to keep from you – you don’t need a drill to make a screw hole!

It’s true, we have developed a truely remarkable device we call the HolyRoller™

With the HolyRoller™ you can:-

  • Make screw hole in seconds
  • Avoid messy brick dust
  • Adjust the hole size in seconds
  • No drill bits to change
  • Handy size to access tight spots

And best of all – it’s a fraction of the cost of a conventional drill!

Don’t believe us?  The try out our special offer:

Order the HolyRoller™ today and pay nothing.  Try it out for 30 days and if you don’t like it, send it back in good condition and you have nothing to pay.  If we don’t hear from you in 30 days we’ll assume you love it – and process your payment!
Fill in the boxes etc.


You’ll need a holy-rolling video to show people how easy it is of course.

Let’s review what we have done:

  • We have made sure that people have been able to pull us from the cloud using their search criteria (we knew who we were looking for)
  • We have further let them pull us to the second stage and at the same time qualified a few out
  • We have pushed them an attractive call to action, if they seriously needed a hole in the first place!

Job done.

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Why every small business should be able to edit their own website.

Posted by cyberbore on 24 August, 2009

CMS made easy – what a great idea!  (This is a recent Monkey Island investment)

Most small businesses and organisations have a website. But how many of us find it easy to keep it fresh and alive with current, relevant information for our customers or clients?

We all now understand the importance of an Internet presence. We know our website has to be up-to-date, relevant and interesting. We know we should update the Testimonials, create regular Newsletters, publish new News, promote company Events, add Special Offers, update our Product or Service, and so on…

We don’t do it. Not just because its time consuming (that’s business folks) but mostly because we don’t know how to in a simple, easy way and at minimal cost. Sometimes because the original developer is charging too much, often because the original developer has disappeared (or grown up!). Maybe because the offered method is technically too challenging.

We look around for a simple and easy solution and all we find is yet more technical geeks trying to sell us yet more complex and expensive software – and then leave us to it! If you can’t be bothered with all that junk, and I can’t – then take a look at CMS made easy. All you have to do is pay a small one-off fee for set-up – in other words, they do anything technical for you – and then subscribe for access to their editor. It costs less than two drinks a month – you drink less and you keep your website up-to-date!

No HTML or CSS knowledge needed. No downloads or installs. Update your website from anywhere – changes uploaded instantly. The editor is so easy to use, very similar to using Word.

You can get a duplicate of your web page up on the screen, looking exactly like it does on the website. Except that CMS made easy have made it so that all you have to do is click on any part and you can edit it! Its truly WYSIWYG – What You See Is What You Get.

Just click in the words and you get a word-like editor, which understands you site style (colours, fonts, etc.) Click on a picture and you get an image manager. Change the settings for size, etc, upload and position a new picture. If the picture is embedded in text, you can even get the words to flow round it on the left, right, top, bottom, etc! Uploading files and linking them in is also easy; its just like using a PC file manager.

You can even create new pages. CMS made easy lets you clone any page, name it and edit it – no need for templates, just copy an existing page that matches how you want the new page to look.  Even better, if you edit with Firefox, you can drag and drop the text and images to anywhere on the screen.

I thoroughly recommend this service.  Find it at


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