Raise cash from your outstanding business to business invoices
Factoring, also known as invoice factoring, is a financial product which allows your business to raise cash from your outstanding business to business invoices. The invoice factoring provider would advance you an agreed percentage against your unpaid customer invoices.
The factoring company takes assignment of the invoices, giving you a percentage of the total invoice value and then takes responsibility for chasing & collecting the invoice payments. This facility comes with the added benefit of credit control.
Invoice Factoring is an alternative form of business finance which is growing in popularity.
It is a great alternative for businesses who have just started trading or are growing quickly, as well as companies who cannot secure the traditional forms of funding from their bank.
Factoring can be useful for improving your ongoing cash flow. It bridges the gap between completing a job and receiving payment for the work, meaning you are able to keep up with bill & wage payments, as well as have the funds to make bulk or early payments to suppliers.
How it Works
The majority of invoice factoring companies make two payments against any invoice you choose to fund. The first payment will be the initial bulk payment against the total invoice value, which is known as the pre-payment percentage. The second payment is the remainder of the invoice, minus the agreed upon fee. This is known as the residual balance. The basic steps of Factoring are below:
- Firstly, you would send an invoice to your invoice factoring company. They would advise how much they could advance on the invoice.
- Once the agreed amount of funding is available, your factoring company will contact your customer to verify the invoice.
- Once the invoice has been verified, your invoice finance company will advance the funds to you.
- Your factoring company will then chase your customer for payment of the invoices which they have advanced funds against.
- Once payment has been made by your customer, you will receive the remaining balance of the invoice, minus the agreed upon fee
To see your Factoring options, use our FREE quote form.