What is credit factoring?

What is credit factoring?

Credit factoring is a method in which businesses that sell on credit can alleviate the problems relating to customers taking along time to pay. Credit Factoring is not a loan – it is the purchase of outstanding invoices by a credit factoring company.

How does credit factoring differs from a bank loan

Normal bank finance such as a loan or overdraft involves two parties, while factoring involves three parties. Banks base their decisions on a company’s credit worthiness, whereas factoring is based on the value of the receivables.

Why is credit factoring so popular?

There are no minimum amounts of credit with credit factoring.

  • There are no maximum amounts of credit with credit factoring.
  • There are no long-term commitments with credit factoring.
  • There are no lengthy application processes with credit factoring.
  • A business can get access to immediate cash with credit factoring.
  • Its very easy and simple to qualify for credit factoring.
  • Credit factoring can radically improve a businesses balance sheet.
  • There are no debts incurred if credit factoring if it is operated successfully.
  • Credit factoring builds good credit scores for all parties involved.
  • Credit factoring can help with a businesses invoice processing function.
  • Credit factoring can increase the readiness of working capital.
  • Credit factoring has the value assed benefit of being a debt collection service.
  • Credit factoring is an excellent tool for credit management.
  • Credit factoring companies provide an excellent credit information service for businesses.

The advantages of credit factoring

  • Credit factoring provides small businesses with the level of credit control that is usually associated with large business.
  • The level of information provided by a credit factoring facility means that customers credit levels can be appraised in detail.
  • The debt collection function is greatly aided by a credit factoring facility.
  • The debt management function of a business is greatly aided by a credit factoring facility.
  • A value added service of a credit factoring is a fully outsourced collections department.
  • The risks of bankruptcy are greatly reduced by a credit factoring facility.
  • The levels of collection and administrative staff are reduced by using credit factoring.
  • Credit factoring can greatly minimise the insolvency of a company.

Get an invoice finance quote today by calling 0800 597 4757 or apply online to compare factoring companies

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