Sometimes referred to as a Full Service Factoring, this provides the complete answer to slow-paying customers, shortage of working capital and, if needed, protection against bad debt losses.
With an invoice factoring solution the factor agrees to pay an agreed percentage of approved debts as soon as they receive a copy of the invoice. The percentage depends upon several issues, but 80-85% is common. The balance, less charges, is paid when the customer pays. This flexible finance keeps pace with business growth, without parting with control or equity.
The factor will also undertake all credit management and collections work, following an agreed credit policy to ensure faster customer payments without loss of goodwill.
The savings in administration are substantial, and faster customer payments mean less need to borrow and lower interest costs. In addition, some factoring companies offer the option of including protection against bad debt losses in their service. This safeguards profits, cash flow and enhances the balance sheet.
There will normally be a charge for the collections service and, if required, bad debt protection, expressed as a percentage of turnover. It is the subject of a formal quotation after we gain an understanding of a business and the workload to be undertaken. It is commonly between 0.75% and 2.5% of turnover.
For the finance provided in advance of collections, there is usually a discount charge calculated on the day-to-day usage of funds. It is likely to be comparable with normal secured bank overdraft rates. This type of finance is generally of interest to start-up and SME sized companies.
For more information on whether Invoice Factoring could help or be right for your business and or to receive a free and with no obligation factoring quote please call Phillip Evans or apply online at Free Factoring Quotes
Also useful when considering factoring take a look at our invoice discounting pages