Factoring is a quick, cost-effective means of accessing working capital while waiting for your customers to pay their invoices. At Business Finance Solutions (UK) Ltd we deal with a variety of factoring companies to offer competitively priced products suitable for all industries.
Factoring helps to manage your sales ledger and collect payments from your customers. It gives you access to almost immediate funds, increasing liquidity and reducing time spent on credit control.
Factoring solutions are usually arranged for your entire sales ledger, or in some cases to manage specific accounts. However, invoice finance is also available for individual invoices. See Selective Financing.
How Does Factoring Work?
Factoring is a fast and straightforward financing process which follows the following steps:
- Your trade invoice is assigned to a factoring company, who then takes on responsibility for collecting the invoice payment from your customer.
- You receive payment of the majority of the invoice amount – up to 90% – from the factoring company. This is paid within 24 hours.
- The customer pays their invoice amount directly to the factoring company.
- The balance of funds is returned to you, minus the cost of finance and any service fees.
Factoring is ideal for small businesses in all sectors, with special suitability for:
- Start-up businesses with a limited trading history
- Low turnover businesses
- Businesses with invoice credit terms of 90 to 120 days or more
- Companies without a dedicated credit control/invoicing team
To qualify for factoring, your business should have a steady cash flow and good credit rating.
Your customers will be informed that their invoice payments will be made to a finance company – which encourages the timely payment of invoices.
To safeguard your business and give you access to the best rates, credit checks are performed on your customers.
Businesses who are uncomfortable making their customers deal with a third party may choose a discreet, confidential factoring service. These service providers handle collections and credit control as if they were a member of your own team, so your customers remain unaware of your business funding arrangements.
Cost of Factoring
The costs of factoring, including the percentage of the invoice paid to you upfront, fees and interest rates vary between providers.
Our team compare the most competitive products for your industry to offer you the best factoring rates and terms.
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