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Factoring for a small Business

Friday, October 16th, 2009

There are literally dozens of factoring companies, some bank owned and many others are independent. A well run factoring facility can provide a cash lifeline by providing funding against unpaid invoices. The ability to unlock this cash provides the financial freedom that a business requires to develop and grow. However in these difficult times the choosing the wrong factoring company can be the difference between a business succeeding or failing. It is even more important for the small business because the wrong choice of factoring company can potentially lead to devastating consequences. So how do you select the best factoring company?

Most businesses with turnover of less than £500,000 will be required to factor their debts. Factoring not only provides cash against unpaid invoices it also provides a credit control system for the business. There are two elements to the charge. The cost of borrowing the money which is usually charged at a percentage over bank base rate or libor and a service fee which is usually a percentage of turnover. Depending on the complexity of the business ,the number of invoices and turnover the service fee can start a a couple of hundred pounds a month or from 0.5% -2% of the total turnover.

Not all factoring companies are the same. Factoring is very much a service driven product and some providers are better than others.  Other than providing cash sometimes we forget that if the credit control of the factoring company is not up to scratch than there is no point  choosing the cheapest provider if they cannot collect the cash. At XL Business Finance we know which factoring companies will telephone all your customers ensuring the cash is collected on time. Many of the bank operated factoring companies will only telephone the top few debtors leaving the rest to be chased by post. Also the number of customers will also impact on service. The geographical location must also be taken into consideration as certain factoring companies are better in certain parts of the country. A good independent factoring broker will be able to guide you through the factoring maize.


XL Business Finance Ltd is a privately owned and independent business financing company with established links to many of the UK's leading finance houses. XL Business Finance provides a viable alternative to high street banks that lack the flexibility and imagination to provide a solution to most business users requirements. XL Business Finance can provide a full range of business financing solutions and we ensure a high level of customer service and pride ourselves on quick decisions. Our independent status will ensure any offer of funding and asset finance leasing is best suited to our customer’s needs.

XL Business Finance Limited are authorised and regulated by the Financial Conduct Authority FRN 718737).

XL Business Finance, Eaton Place Business Centre, 114 Washway Road, Sale, Cheshire M33 7RF UK.


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