Factoring
Factoring is the process of purchasing commercial accounts receivable (invoices) from a business at a discount.
Key Features
Factoring includes full ledger management, leaving you with more time to run your business. Bad Debt Protection is also available, offering you peace of mind against bad debts.
Who is it for?
- Limited and sole traders/partnerships
- All companies from new start to multi-million pound turnover
- Suitable funding for Management Buy Outs/Buy Ins, company acquisition and refinancing
- Companies with rapid growth models
- Companies who are experiencing financial difficulties
- Companies with seasonal sales cycles, affecting cash flow
Benefits
- Frees Cash - Releases up to 90% of the money tied up in unpaid invoices
- Money to Invest - Improved cash flow allows you to invest in new
- Expand Credit Terms - Offer credit terms to your customers, confident that credit checks are easily obtained and payment behaviour is being closely monitored
- Saves Time - Eliminates internal invoice ledger management, factoring companies provide a full service including monthly statements
- More Funding - Allows borrowing beyond the levels of normal unsecured overdrafts, usually for a much lower borrowing rate
- Flexible Limits - Funding grows inline with your turnover, the more you invoice the more funding available
- Trusted Names - All invoice finance companies we work with are members of the industry body, Factors & Discounters Association
What are the next steps?
- Get quotes from 20 factoring companies right now!
- Choose which companies you would like to talk to
- The factoring company should meet to structure the right deal for you. All that is required is some basic financial information and the structure of your invoicing
- If you are currently using factoring, compare your facility to our panel of providers. The process of moving factoring providers is called 'inter factor transfer', normally completed within 24 hours
Compare Quotes
Compare, Decide, Buy
Frequently asked questions
How long will it take for me to get the money?
Money can be in your account in less than a week from the initial meeting.
What is the standard contract length?
12 months is the usual length of a contract, with a 1-3 month notice period. Some companies will offer you a 3 or 6 month trial to see if the facility is a good fit for your business.
Do I have to factor all of my invoices?
Factoring contracts specifically list excluded invoices, so there needs to be a demonstrable difference between invoices that require factoring and those that do not. Sales to associated companies, contra accounts and cash/credit card sales are automatically excluded. The service fee reduces in relation to an increase in turnover so it is normally prudent and cost effective to include as much as possible.
I am a bit nervous about a factoring company contacting my customers, how do I know that they will treat the collections process sensitively and deal with the particular circumstances of each customer?
Every day an invoice is past its due date the risk increases to you that your customer will default on payment. It is in the factoring companies' interest, as well as your own, to encourage invoices to be paid on time. Factoring companies earn more money the better you do, so it is in their interest to help you grow your business.
What will my customers think if I use this kind of facility?
While some companies will start using a facility when they are experiencing a downturn in sales or a sticky patch in their cash flow, a larger number will turn to factoring because they are trying to keep up with their ever increasing order book! The image of the product now is vastly different to it's image in the 1980s, with companies of £500 million turnover or more using it as their principal funding solution. However, confidential facilities are offered by some lenders should you wish to explore this aspect.