RELEASE FUNDS ON UNPAID INVOICES

Invoice factoring facilities provide finance against unpaid invoices with the additional advantage of a full collections service.  Factoring provides a working capital facility that grows with your business but also provides a credit control function as the factoring company collects unpaid invoices on your behalf.

Invoice Factoring is very straight forward.   You deliver goods or services to your client and notify the factoring company of the work performed providing a copy of the raised invoice.  The factoring company will immediately advance you the pre-agreed percentage value, typically 70-90% of the invoice (although some factoring companies advance 100%). Once the invoice is paid by your customer, charges are deducted, and the factoring company pays you any remaining balance of the invoice value.

There are two headline charges associated with invoice factoring facilities and some secondary costs which should be studied in the small print.  Firstly, the interest element for the actual amount of money borrowed. This is typically vary similar to interest rate charged by a bank for an overdraft however it does vary from finance company to finance company

The second element is the cost of providing and administering the factoring facility and for the provision of the credit control. This charge is usually a percentage of the annual turnover although for businesses with smaller turnover it is possible to get this for a nominal monthly fixed fee.

There are also different options to consider when choosing the right factoring facility for you;

Confidential factoring is a flexible funding solution for businesses which offers the cash advance and credit control aspects of a factoring facility combined with the confidentiality of invoice discounting, so the factoring company approaches your customer using your company name.

Non-recourse factoring is where the factor takes on the bad debt risk. It accepts specified risks around the debtor’s failure to pay and because of this, non-recourse factoring will be more expensive than recourse factoring.

Single Debtor and Single invoice finance is also available.

Any business providing goods or services to other businesses on credit may be eligible to apply for a factoring facility.

For further information and advice, contact us today.