Factoring
Factoring can provide your business with valuable cash flow.
Initially it will provide your company with 90% of the value of your outstanding gross invoices. On an ongoing basis you will receive 90% of the ongoing invoices you raise the day after you raise them.
By factoring your invoices you are smoothing your cash flow. Factoring allows you to budget with confidence as you are less reliant on when your customers pay.
Within the UK there is a whole market of factoring companies. Factoring is readily available if you meet the basic criteria of selling to other businesses on credit terms. The challenge however is finding the right lender to meet your needs. They all structure facilities differently and the pricing is difficult to understand making it hard to make direct comparisons between lenders. This is where we can help you find the best factoring facility for your business.
So how does factoring work? Well in effect you are selling your invoices. You notify each invoice to the factoring company – this is typically done electronically to minimize administration for all concerned. They will then finance the invoice as agreed. When the invoice falls due they will do the required credit control for you to ensure that the cash is collected in a professional and timely manner. When your customer pays the factoring company the balance of the invoice is released to you less any factoring charges.
Additionally many factoring companies will offer you bad debt protection which reduces your risk of bad debt.
- Finance – the factoring company will prepay up to 90% of the value of each outstanding invoice.
- Credit control – they will do the administration you don’t enjoy to ensure cash is collected in a timely and professional manner.
- Bad debt protection – they will protect your business against the risk of bad debts allowing you to grow with peace of mind.
So to summarise factoring offers 3 main services:
Factoring can be confidential or disclosed. If you do not want your customers to know you are factoring then it can be confidential. In fairness a lot of successful companies use factoring as it is an ideal way to fund growth so confidentiality is not a major issue.
Factoring can allow you to do your own credit control if you prefer. It is a good opportunity to outsource the credit control to professionals but if you would prefer to do your own credit control this can usually be accommodated.
If you are looking for a factoring facility please contact us today on 0845 863 0738 or fill in our online factoring quote.
