Factoring invoices allows you far greater flexibility to access your outstanding debts and improve your cash-flow. This improved cash-flow can be used for any normal business activities such as:
Better working capital (startups and mature businesses)
Additional sales ledger management
Capital intensive projects
Acquisitions
Financing rapid growth
Invoice Factoring often allows greater access to funding for companies where funding can traditionally be harder to access because of the age of your business or the lack of security you can provide. Factoring can be seen as a short-term loan.
Invoice factoring is a flexible and tailored service which allows you to dramatically improve your cash flow.
How does Invoice Factoring work?
Factoring (and invoice discounting, another form of invoice finance) offers most businesses the great benefit of providing cash against unpaid invoices. Due to the way that borrowed money is secured, factoring frequently allows businesses to borrow larger amounts of money compared to more traditional forms of commercial finance such as bank overdrafts.
You will receive advances of funds against your outstanding sales invoices. You inform your bank or invoice factoring provider electronically or by post that you have issued an invoice and the factoring service will typically provide up to 90% of the value of your invoices and can usually be paid out within 24 hours of raising them. The remaining debt is forwarded to you once the debt is settled, less any finance charges.
A key benefit of Invoice Factoring is its ability to provide credit management releasing valuable time for your business. The factoring provider will agree procedures with you and send statements and reminders to your customers of outstanding debts. Beyond this, you at all times remain in control of your customer relationships.