What Is Invoice Factoring?

Invoice factoring is an easy way to borrow money for your company. When you use this type of service, you are borrowing money against what your customers owe you. Instead of using a physical asset as collateral, you are using the money owed to you in the form of your invoices as collateral.

The lender works out how much they are able to lend you against each invoice and how much that will cost you. In many cases they will lend you as much as 90% of the face value on the invoice. The interest they charge varies, but in many cases, you will not be charged any more than you would be elsewhere.

What Kind of Business Can Use Invoice Factoring

Invoice factoring works for any type of or size of business. Blue chip companies regularly use it to help them with cash flow or as a way of varying their financing portfolio. Small plumbers and other service providers use it as a way of balancing their books. Even companies who are experiencing financial difficulties can sometimes use this kind of financing to get them through a rough patch. If you need to buy a piece of equipment to take advantage of a new and emerging market you can do so using this kind of financing.

In certain circumstances, you could be turned down for this kind of finance. However, many firms who cannot borrow money elsewhere find that they can do so using this form of finance.

Finding an Invoice Factoring Provider

In the UK, invoice factoring is still not a widely used way of borrowing money, so finding a provider in the Yellow Pages is quite difficult. However, you can find a few providers using the internet.

The search term 'invoice factoring' brings back a reasonable list. When deciding on who you will use bear in mind that you are likely to require other financial services and that the relationship you will have with your lender should be a long one. As a result, look for firms who offer other ways to borrow money and who are well established and experienced.