Is Invoice Factoring For You?

If you are a medium sized business looking for finance invoice factoring is well worth considering. It is a quick and easy way of raising money to help you to develop and grow your business. Whilst it is not for everyone, it is at least an option to consider.

Who Can Use Invoice Factoring?

The brokers that offer this service do usually have a criterion you have to meet in order to qualify to use their service. In most cases, you have to be a well-established firm that is still profitable. Your turnover has to be at or above £250,000 per year. You sometimes have to demonstrate that you have an efficient invoicing and collection process in place. Some companies require you to meet other criteria, but the ones we mention here are the basic standards you have to meet to qualify for this kind of finance.

How Invoice Factoring Works

Invoice factoring allows you to borrow money using what you are owed by customers as collateral. If you are owed £100,000, you can potentially borrow £90,000 from the factoring broker. When the customer pays their invoice, they pay the broker who then gives you the rest of the £10,000 owed minus the interest they are charging and any fees.

However, with invoice factoring you usually get access to other services. This can include help with managing your sales ledger including collecting outstanding invoices for you.

The best companies offer a confidential version of their services. This means that your customers need not ever know that you are using factoring as a form of finance. This can be important to help you to maintain customer confidence and to prevent customers from speculating that you have money issues and pressuring you for further discounts.

The best invoice factoring firms also offer you the chance to access non-recourse factoring. This service provides you with peace of mind, because it protects you from situations where customers are unable to pay your invoice. Some firms also offer factoring services secured against invoices raised with your customers that are located abroad.