The key issues to consider when choosing a lender are:

•    Does the lender provide the basic service that you want?

•    Do they supply additional services such as advances against stock, loans under the DTI’s Small Firms Loan Guarantee (SFLG) scheme or ‘structured loans’ against a package of different assets such as plant and machinery or property?

•    What level of advance is being offered as a percentage of your total debtors and total value of the facility as an upper borrowing limit?

•    Is there any flexibility in providing temporary over advances say to meet a quarter end VAT payment?

•    Are there any limits placed on concentration or levels of export debts?

•    Will they allow ‘overpayments’ where they advance more than their normal advance to cover particular circumstances such as a VAT quarter (and if so how much will this cost?).

•    What are the service charges and interest rates? What services are included and what are charged as extras?

•    What minimum charges are built into the offer which means that you will pay for services whether you are using them or not?

•    With factoring, how are debtors going to be chased? Ask for statistics to see how effective the lender’s chasing is.

•    Will the lender provide you with live internet access to your account? Is communication with the lender (eg the uplifting of invoices and drawdown of cash) based on post or email/web access?

•    How easy are the lender’s statements to follow?

•    What is the minimum contract length (usually 12 months) and any notice period thereafter (often another three months). What are the termination provisions and any exit penalties if you need to get out early?

•    What are the lender’s collect out charges in the event that the business fails?

•    Is the lender asking for any additional security by way of personal guarantees and if so, on what terms?

Please view our free 44 page guide which includes a handy key point checklist.