Factoring - What is it

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Factoring is an extremely flexible method of providing cash flow for a business. The amount of funding available also increases in line with the growth of the business.

How does factoring work?

Under a factoring facility, copies of the sales invoices are provided to the factoring company. Once received, the factoring company will immediately advance up to 85% of the invoice value (in some circumstances, advances of up to 100% are available). The balance of the funding is received when the customer pays. So the business benefits from "accelerating" the cash flow by up to 85% of the debtor book.

How much does factoring cost?

The cost of funds is similar to that of the conventional overdraft (1.5% to 3.5% above base. A service fee will vary significantly depending upon workload of the factor, but this can vary between 0.5% to 3% of turnover. As every client is different, each deal is priced accordingly.
By using a factoring facility, the factor provides a credit control function and chases outstanding debts on your behalf. This gives you the advantage of having a professional credit control department working for you, but your customers will be aware that you are factoring.

How can factoring help me?

Factoring can be used to accelerate cash flow in a number of situations:

  • Start up or phoenix business Management buyouts Business expansion
  • Corporate acquisitions Funding
  • CVA's
  • Company purchase of own shares
  • Replace bank overdraft (often removing your house from the bank's security!)

Factoring is also available from specialist factoring companies for the traditionally hard to fund areas such as:

  • Export Construction Industry
  • Single Debtor Finance
  • Local Authority Funding

Should you wish to source an appropriate factor for your business, or just chat through the pro's and con's of using a factor, then please contact us.

Contact us today about our Factoring and Invoice Discounting : email: enquiries@fundingsolutions.ltd.uk : tel: 0844 4144379