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What is a Business Receivable?

In most business in the UK business receivables are generated when an invoice is sent to a customer. Most businesses in the UK offer payment terms up to 90 days and some businesses offer a discount for early payment. Offering discounts is part of accounts receivable if a company agrees these terms in advance as is all part of the accounts receivables day to day activities.

  • Account receivables owed by the company’s customers are called trade receivables
  • Account receivables are classified as current assets assuming that they are due within one year
  • Businesses in the UK often turn to factoring companies to collect the entire business receivable ledger.
  • There are varies names for account receivables such as; book debt ledger, invoices or current assets.
  • A business can get relief for specific business receivable invoices that have gone bad by way of credit insurance.

What is Business Receivable Factoring?

Business receivable factoring is a financial transaction whereby a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount in exchange for immediate money with which to finance day to day operations. To make matters more confusing business receivable factoring is also known as; Asset based lending, sales ledger factoring or just plain old factoring.

The advantages of business receivable factoring

  • Cash can be accessed immediately by utilising an efficient business receivable factoring facility.
  • If a business is unable to obtain a bank loan then business receivable factoring is the next best thing
  • Business receivable factoring provides an ongoing source of cash as long as invoicing is regular.
  • There are no rigorous business credit checks involved.
  • A business using a factoring facility will always have funds to meet important payments such as tax and salaries.

Business Receivable Factoring Vs Factoring Alternatives

In the UK some business factoring lenders often meet small businesses seeking to finance their short-term business receivables. They are constrained from serving this market, however, by the prospective borrower’s business sector, growth issues, and/or historical performance. In these situations many small business concerns find themselves referred to specialised factoring businesses who offer:

  • Factoring without the outsourcing element is called invoice discounting.
  • There is also often called asset based lending.
  • Borrowing against other assets
  • Business loans
  • Business overdrafts

We can arrange accounts receivable financing. Call 0800 597 4757 to compare factoring quotes instantly online or speak to a member of the factoring accounts receivables team.