Insurance against client failing to pay

[bullseye]

This one is for my plan B.

I just wanted to explore if there are any insurers who would insure your invoices, i.e. if the client refuses to pay (assuming I have done everything right on my part) or goes bankrupt, insurer would pay. (Please dont tell me that insurer would charge the invoice amount+interest as the premium)

I doubt there will be anything like that, however I wanted to check if there are any options like as I mentioned

[Gonzo]

This one is for my plan B.

I just wanted to explore if there are any insurers who would insure your invoices, i.e. if the client refuses to pay (assuming I have done everything right on my part) or goes bankrupt, insurer would pay. (Please dont tell me that insurer would charge the invoice amount+interest as the premium)

I doubt there will be anything like that, however I wanted to check if there are any options like as I mentioned

You want to google for "invoice factoring" and look at the options available there.

I understand that they pay you something like 95% of your invoice value and then collect the full amount from your client, keeping the difference.

I have never used this myself though so cannot warn you of any pitfalls.

[TykeMerc]

You want to google for "invoice factoring" and look at the options available there.

I understand that they pay you something like 95% of your invoice value and then collect the full amount from your client, keeping the difference.

I have never used this myself though so cannot warn you of any pitfalls.

Factoring assumes that the invoices actually get paid, if they don't then the Factor will expect their money back and that will be in the contract you sign with them in the first place.

I'm not aware of any insurer that will cover the payment of commercial invoices, it seems unlikely that any such insurance would (if it exists) be at an attractive premium as the commercial risks are insane.

[Gonzo]

Factoring assumes that the invoices actually get paid, if they don't then the Factor will expect their money back and that will be in the contract you sign with them in the first place.

You learn something new every day. They seem a bit expensive for what they do do then.

In that case, I guess it has to go down a business risk which has to be mitigated by the credit terms that you give to your customers.

[The Agents View]

You learn something new every day. They seem a bit expensive for what they do do then.

In that case, I guess it has to go down a business risk which has to be mitigated by the credit terms that you give to your customers.

Yes - I have a vested interest in this (obviously) but are you not better off using an agent and spreading the risk?

Most agencies will pay you weekly, or at worst monthly on production of a timesheet and invoice - from that moment onwards, the invoice is their problem - they can't take back what they've paid you.

Just a thought.

I will now await the onslaught of abuse.

TAV

[TykeMerc]

You learn something new every day. They seem a bit expensive for what they do do then.

In that case, I guess it has to go down a business risk which has to be mitigated by the credit terms that you give to your customers.

It depends what you regard as expensive really.

Consider the risks that a Factoring Company takes:-

• Their customer has or expects to have cash flow issues
• They advance funds against invoices for work that they haven't done and have no real assurance was done acceptably, if the end client doesn't pay up then they have to pursue their customer
• They either borrow the funds to Factor with or take them from company reserves
• If the customer does a runner or goes bust and the work invoiced is disputed the Factor is firmly out of pocket

I don't know about you, but even with these very basic risks which ignore such things as Export/Import duties and licences, fraudulent transactions or other illegal stuff, I wouldn't set up as a Factoring business unless I had a ton of spare cash and charged a sizable fee to cover bad payers.

Yes Agents do take Factoring risks, but their business model does differ quite a bit from standard Factoring Businesses.

There are quite a few Factor business models of course, I've only mentioned the simplest and the most common that I've come accross in the past.

[Fred Bloggs]

To me, the agency factoring aspect of the invoices is probably the most valuable part of the contractor/agency relationship.

[bullseye]

Yes - I have a vested interest in this (obviously) but are you not better off using an agent and spreading the risk?

Most agencies will pay you weekly, or at worst monthly on production of a timesheet and invoice - from that moment onwards, the invoice is their problem - they can't take back what they've paid you.

Just a thought.

I will now await the onslaught of abuse.

TAV

The kind of business my Plan B is, there is no luxury of using Agents. Infact, I would be the agent and most of my customers would be low turnover or medium trun over manufacturing companies (the ones who are still surviving).

Factoring could be of help but was not exactly what I was looking for. As Gonzo and TM said I would have to take this as a business risk and see how I could handle it in a way it benefits my company

[BrilloPad]

To me, the agency factoring aspect of the invoices is probably the most valuable part of the contractor/agency relationship.

You mean its not the quality agent service?

[Alan @ BroomeAffinity]

Google "credit insurance". You'll see there are a lot of providers. From memory it can be expensive and you are requried to jump through a lot of hoops. If you even the slightest part of the procedure wrong cover is excluded.