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Factoring for new businesses or startups

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Factoring for new businesses or startups

When you’re starting up, cash flow will be the biggest factor. In the UK over half a million new businesses or start start-up firms are set up every year. Starting a new business can be an uncertain time. There a several key factors that can help you successfully start up and run a business. A well-thought out business idea, proper sourcing of finance and good business planning can ensure that a new business has the best chance of success.

New businesses and startups often have great difficulty in securing loans and overdrafts from banks. In today’s ongoing credit crunch this can often leave new businesses and startups without a financial base and also being unable to take advantage of business opportunities.

Costs relating to new businesses or startups

  • Marketing costs
  • Completive pricing
  • Being under capitalized
  • Poor financial planning
  • Regulation and compliance costs
  • Costs relating to finding new customers
  • Many profitable new business and startup businesses face insolvency because they ran out of cash.
  • It takes time to get a sales momentum going and for many businesses
  • Sales are slower than predicted.

Factoring as a source of funding for new businesses and startups

It is common rule of thumb that new businesses or startups should have access to a sum of money at least equal to the projected revenue for the first year of business in addition to his anticipated expenses. This is not always possible. For this reason many new businesses or startups consider invoice factoring.
Factoring is a financial service for businesses in the UK that is aimed at improving a businesses cash flow by providing finance against invoices to customers who take up to 120 days to pay. Factoring companies usually advance payments up to 90% of the amount of assigned invoices within 24 hours. Factoring can free up business cashflow for new business and startups

  • New businesses and startups get into trouble, especially with the culture of late payment that exists in the UK. Factoring can be a option to avoid the fear of late payment.
  • With factoring a new business or startup can focus on running the core business without worrying whether clients will pay you.
  • Factoring makes cash flow more predictable for new businesses or startups.
  • A factoring facility will let new businesses make better business decisions and plan growth strategically.
  • Please note that new business or startups cannot use factoring if they are in the retail sector or trade mostly in cash.
  • Factoring can be expensive for a new business or startup with factoring costs and charges being between 0.75 and 2.5% of turnover, plus interest.

A new business needs cash to keep a business viable while it may look for more traditional sources of funding. Factoring may be the ideal solution. If you run a new business or startup or are thinking about starting a business or expanding a business please call us to discuss an invoice discounting or factoring facility. Call 0800 597 4757 or apply online

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