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      Bad Debt Protection

      Everything you need to know about Sonovate's bad debt protection

      What is Bad Debt Protection?

      Bad Debt Protection is a service we offer to protect our customers against financial losses caused by the failure of their clients (debtors) to pay their debts.

      Funding request process

      • As part of our shared service level agreement, Sonovate guarantee a same day response for funding requests submitted by 1pm. However, if a Credit Protected Limit decision requires escalation to an underwriter, the process will likely take longer.
      • As soon as a Credit Protected Limit is approved, you'll receive notification in your Sonovate account if submitted via our Portal, or via email if submitted via our Instant Request Checker.

      Bad Debt Protection

      We offer our customers Bad Debt Protection on 95% of the net invoice value.

      This protection can ensure your cash flow is not as adversely impacted by a Client's (the Debtor of the debt) financial failure.

      The main points are detailed below:

      • 95% of the value of the net invoice is protected – e.g. if there was a £10,000 + VAT (£12k) bad debt then you would be protected for £9,500 of the debt. The VAT would not be paid from bad debt protection (but can be reclaimed from HMRC on the VAT you’ve already paid!). There are some caveats as detailed on the HMRC website - https://www.gov.uk/vat-returns/fill-in-your-return. This process would be completed outside of Sonovate by yourself or your accountant.
      • Bad debt protection is only available on Funding where client payment terms are less than 60 days - Funding with terms over 60 days will be considered on a case-by-case basis.
      • Where your Client contract contains a Paid When Paid (PWP) clause, you will not be fully protected under Bad Debt Protection. In order to secure a fully protected Credit Protected Limit against your Client contract, you will need to notify us of: the PWP clause, the End-debtor, payment terms between Agency and Client, and payment terms between your Client and the End-debtor.
      • Where your contract is with an RPO and there is a PWP clause, the Bad Debt Protection against the End-Debtor is only valid against Insolvencies. Bad Debt Protection for the RPO will be valid against insolvency and protracted default.
      • Bad Debt Protection is only enforceable for undisputed, genuine, and lawful debt.

      Bad debt protection against:

      • Insolvency: this is when a company is not able to repay its debts when falling due, and includes liquidation or administration of the Debtor
      • Protracted Default (PD): when a company fails to pay the contractually agreed debt within the agreed period and after our Collection process is completed. 

      When one of the two above events materialises, we will seek to recover the unprotected part of the debt from you when we pass the claim.

      For more information on our collections process, please click here.


      Recourse Amount

      5% of the net outstanding approved debt.


      How much does it cost?

      Bad debt protection is included in our price as standard and there are no hidden costs such as credit check fees, annual renewal fees or credit limit fees!


      How much protection do I get on each Debtor?

      We provide you with a bad debt protection limit, documented as a Credit Protected Limit against each of your Debtors. 

      We continually credit check all Debtors, prior and during funding, so you remain informed of your bad debt protection level, assuming all collections processes have been correctly followed.

      How fast are you?

      As part of our shared service level agreement, Sonovate works towards a same day response for funding requests submitted by 1pm. After this, funding requests will be reviewed by 1pm the following working day.

      Sometimes the consideration of funding and offering bad debt protection requires human underwriting and further review.

      In these circumstances we typically review these cases within 24hours, but may require additional information, either from You or the Debtor, such as:

      • Up to date financial statements; Fresh credit investigation for new entities;
      • or, Clarity on group structure and group financial performance and support.

      What happens on debt not covered by your Bad debt protection

      Unfortunately, there are no guarantees to the provision of us offering bad debt protection. We understand this can be a frustration but there are options in these circumstances:

      You can request the client reduces the terms, for example, from 30 days to 14 days which reduces the exposure.

      Sonovate can offer to fund with recourse - this means that the invoices will be funded without any cover but in event of non-payment or insolvency, the full amount of the debt would be liable to be paid by you, so it is important to consider the implications of accepting the recourse.

      It is also worth noting that this is offered under the discretion of management and can be withdrawn if any concerns around payment or further market information is revealed.

      You can request up to date financials for us to reconsider our position on the bad debt protection.

      On occasion, our Bad Debt protection cover can be withdrawn due to impacting events, such as; down turning company accounts, late filling of accounts and negative media updates.