Invoice Finance - Factoring
Invoice factoring is a way for businesses to release money from their unpaid invoices by selling the invoice to a factoring company at a discounted rate. The factoring company advances an agreed percentage of the invoice value within a matter of days and pays you the balance of the invoice once your customer pays, less interest and charges.
Under a factoring agreement, the factoring company takes over the credit control function and deals with your customers directly to ensure your invoices get paid on time. Your customers are made aware that you use an invoice finance facility and they make payment against your invoices to a bank account controlled by the factoring company.
Factoring might be the best solution for your business if you spend a lot of time on credit control as the factoring company will carry out this function for you which frees up your time to focus on your core business. It is important to note that Factoring will usually cost more than invoice discounting and at some point it may be more cost effective for your business to return the credit control function in-house to be carried out by your own staff.
Factoring, like any other business finance product you have in place, should be reviewed regularly to ensure it still fulfulls the needs of your business.