What is invoice factoring?
Invoice Factoring
When you factor your invoices, the factor also collects payment from your customers.
Your invoices will be issued with a notice, telling your customers that they need to pay the factoring company. The factor will send out statements, and carry out credit control on your behalf.
You can also include bad debt protection, meaning you will still get paid if your customer becomes insolvent or takes a very long time to pay (protracted default).
Good for: Invoice factoring is best suited to new start and young, fast growing businesses that do not have the time and resource to chase debts.
Invoice factoring - FAQs
What is invoice factoring?
Invoice factoring (also known as debt factoring or just factoring) allows your business to release cash against your outstanding customer invoices before they’ve been paid.
The invoice factoring company also manages your credit control so you can concentrate on growing your business.
Who is invoice factoring for?
Invoice factoring is ideal if your business has customers on long payment terms and/or often pay late.
It can also be helpful if you spend more time than you would like managing your customer payments.
Why should I use invoice factoring?
Invoice factoring gives you fast access to cash you’re owed, helping to improve cash flow so you can run your business smoothly and efficiently while building working capital.
Because you are also outsourcing credit control, you will have more time to focus on growing your business.
Unlike a traditional overdraft or loan, it grows in-line with your turnover making this model of commercial funding a flexible solution for managing your cash flow.
Do I need to provide any security?
Because invoice factoring is secured against your invoices there may not be any need for additional security.
How long does it take to set up invoice factoring?
An invoice factoring facility can be set up in a matter of days, but it is very dependent on the size and complexity of your application and how quickly we get the information that the factoring company needs to them.
What happens if my customer doesn’t pay an invoice?
If your client doesn’t pay within the agreed period, also known as the recourse period (which is usually 90 days), funding will be removed.
How much does invoice factoring cost?
Every agreement and facility is different. The cost to your business will depend on your needs and the services you choose to use. If you would like discuss how invoice factoring could work for your business, and get an idea of costs, get started now.