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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