Explained – Factoring Finance and Invoice Finance

Factoring may seem an alien term to some but more and more businesses are becoming aware of this type of finance as the lack of support from the banks continues.

Put simply factoring, aka factoring finance, invoice factoring, accounts receivable finance, or invoice finance is a finance facility whereby a business can raise cash against its unpaid sales invoices. Typically 80 % of the invoice value can be obtained depending on the business’ circumstances and in some cases 90% of the invoice value can be financed against.

The business with the facility raises customer/sales invoices in the usual manner but then forwards a copy to the factoring company who in turn advances the funds into the factoring customer’s account, typically within 48 hours of receiving the invoice. This means that the business with the facility can offer its customers 30, 60 or even 90 day invoice terms but get 80-90% of the invoice value within 48 hours of creating the invoice.

When the customer pays their invoice (i.e. after 30, 60, 90 days) the factoring provider takes its monies back (i.e. the advance) and then forwards the balance less its fees over to the business with the factoring facility.

With bank lending levels still low and despite half hearted attempts by government to change, the harsh reality is that the landscape of traditional bank borrowing has changed forever, and banks are less and less averse to taking any risk.

So, over the last 3 years whilst bank loans and overdrafts have been not been renewed, had terms amended to price customers out the market or even been withdrawn, invoice finance has filled the void and in doing so enabled UK business to grow, and avoid cash flow difficulties.

There are many criteria that you should consider when choosing the correct factoring facility for your business and Factoring Finance has a UK wide, independent network of brokers from whom select the best deal and best provider based on your circumstances and needs.

Whether you are a start-up business, an established SME or large scale national business looking for acquisition, there are a number finance companies that are specifically geared for your needs. There are plenty of invoice finance providers to choose from and as such a good impartial view point from Factoring Finance will save you time and potential future headaches.

For more info on how Factoring Finance can help you fund you business via your sales invoices simply get in touch and we can discuss the best facility to help you manage your cash flow and avoid late payment problems, or use the facility to grow.

Whatever the need, Factoring Finance has a UK wide, independent broker network able to source the best invoice discounting and invoice factoring deals from numerous small business finance providers.


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