What is Factoring? - Business Finance

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Factoring

Factoring is a type of Invoice Finance that is gaining popularity due to its flexibility and ease of borrowing.

Like a loan, with factoring you are borrowing against the assets in your sales ledger, however unlike a loan you don't receive a lump sum that you have to pay off over time.

What is factoring?

Factoring releases up to 95% of the cash that is tied up in your unpaid invoices often within 24 hours of you raising the invoices.

The benefits of factoring means that you no longer have to wait between 30 and 90 days to receive what you are owed. By using factoring, a factoring company pays you up to 95% the value of your invoice almost immediately which improves your cash flow and allows you to use the money however you like.

Factoring and releasing the money held up in your sales ledger can represent a really huge amount of cash and can therefore really release the potential in your business.

How does factoring work?

You issue your customers with their invoice in the usual way and the factoring company then pays you up to 95% of the overall value of the invoice often with 24 hours of raising the customers invoice. The factoring company with then collect the money directly from your customers. Once your customers have paid your loan is paid off.

The benefits of factoring

Some of the benefits of factoring are as follows:

  • Its flexible
  • No security is required
  • Its controllable
  • The more business you do, the more you invoice the more you can borrow
  • You save time and resources on managing your sales ledger, collecting payments and credit control
  • Its great for short and medium term borrowing
  • It releases the money that is tied up in your sales ledger
  • You get immediate access to the money you have already earned
  • You get paid up to 95% of your sales invoices often within 24 hours - this means that if you are owed £100,000 by your customers you could get up to £95,000 within 24 hours!
  • Your cash flow worries are reduced or disappear
  • You can use factoring to help you become solvent
  • The service can be kept confidential

Professional Advice

If you think that factoring my be the right solution for your business it is worth speaking to a Business Finance specialist to make sure that you make the right decisions for you and your business.


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