If you're thinking about switching your invoice finance provider due to dissatisfaction or any other reasons, this comprehensive guide is for you. We'll cover everything from understanding UCCs to the process of transitioning and essential questions you should ask before committing to a new partner.
Invoice finance companies typically register a UCC filing to protect their interest in the invoices they finance. The UCC:
Switching companies involves a "buyout", where your new provider settles the balance with your old one, akin to refinancing a mortgage. This buyout process is governed by a Buyout Agreement signed by all parties involved.
This usually comprises the total unpaid invoices minus reserves, with added fees from the old financier. Always request a detailed breakdown to understand any added charges or early termination fees. Knowing this amount is crucial, especially if the new agreement offers a better advance rate that could cover the buyout without adding more invoices.
Transitioning can be cost-neutral if you provide fresh invoices to the new financier. However, re-submitting previously financed invoices can result in double fees. Some financiers might offer fee discounts, but it's essential to notify the old provider in time to avoid additional charges.
The switch can add extra days to the usual process due to buyout calculations and approvals. The buyout amount may vary because of accruing fees and ongoing payments. Partnering with an experienced company can streamline this transition.
In certain situations, both old and new financiers might share rights to your invoices until the previous balance is settled, although it's not standard.
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