Factoring is a way of providing funding for your business against value of your sales ledger, the factoring company also provides a collections service who will undertake the credit control our your sales ledger on your behalf. Factoring gives you more time to run your business and is quite often more cost effective than hiring a full time credit controller.
A factoring facility will improve a company’s cash flow and can be used to fund a new venture or acquisition, support growth and even raise capital to purchase stock or plant & machinery. Compared to a traditional bank overdraft factoring is more flexible and will grow as your business does giving you more funding as the business.
Using factoring is simple, you invoice your customer as normal and send a copy of that invoice to the factoring company. Within 24 hours of them receiving the invoice up to 90% of the invoice value is made available for you and you are able to draw down these funds as and when you need them. The credit control will be undertaken by the factoring company and once paid the remainder of the balance is made available for you to draw down as a payment. The factoring company will also send out statements on your behalf and if necessary take legal action on your behalf.
In addition to your factoring facility it is possible to also take out Bad Debt Protection this quite simply safeguards you against potential losses incurred if one of your customers fails.
If you would prefer to retain credit control in house and would like to fund your invoices confidentially so that your customers are unaware of how you choose to fund your business you may want to consider Invoice Discounting as an alternative to Factoring.
Our experienced team of dedicated advisors can let you know whether or not these products are appropriate for your business or if alternative sources of funds should be considered.
This appraisal is free of charge, contact us on 01451 832533
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