Factoring is a dynamic alternative to the business overdraft

Particularly suited to rapidly growing companies or those which operate on tight supplier payment terms, factoring can provide a business with funds within 24 hours of goods or services being delivered. It is available to a wide range of businesses, even those which have historically been very hard to fund, such as contracting or construction.

Factoring is when a business sells most or all of its invoices to a third party (called a Factoring Company or lender) at a discount. The Factoring Company provides financing to the seller of the invoices in the form of a cash advance. This is usually in the region of 70-90% of the invoice value, with the balance being paid, net of the factor's fee, upon collection.

The Factoring Company usually takes over responsibility for the credit control of the sales ledger, including the collection of payment for the invoices.  As a result the factoring facility is usually disclosed via an assignment notice on your invoices i.e. your customers will be aware that the invoice has been factored.

How does Factoring work?

All you need to do is…

  • Send your invoice and PoD to both your customer and the Factoring Company (usually electronically), and within the next 24 hours you will receive access to up to 90% of its value
  • The Factoring Company will carry out the credit control and chase your customers in an agreed and timely manner
  • When your customer pays the factor, the remainder of the invoice will be paid to you less their fees.

The Benefits of Factoring

  • Unlocks the money tied up in your invoices, giving you access to your cash quicker which can help you to grow your business
  • The option of Bad Debt Protection to protect your business against customers failing
  • It’s a flexible finance that grows as your business grows
  • Instant relief from debt; factoring can provide funds in days to help pay creditors
  • Professional credit control which collects your money in faster and saves you the time and trouble
  • Dedicated Credit Controller and Personal Account Manager who will understand your business and will work with you to make the most out of your facility
  • 24/7 access to your account
  • A speedy solution – you could be up and running in as a little as three working days from now.

Factoring is continually evolving and variations of the product are available. For example, there is a confidential version suitable for some businesses, or you may prefer to carry out your own credit control.  There is even the possibility of just factoring a single invoice or single customer (spot factoring).

If you have particular business funding needs, we can usually find a factoring solution tailored to your requirements. Just complete the Contact Us form or give us a call on 0845 180 1188.