Logo

How can factoring help a business?

Factoring – also known as ‘debt factoring’ – involves a business selling its invoices to a third party. In return they will process the invoices and allow you to draw funds against the money owed to your business. Essentially, these companies provide a finance, debt collection and ledger management service.

Factoring can help businesses to improve cashflow but can also be used to help reduce administration overheads. Businesses that supply this service are called factors or debt factoring companies.

How exactly can factoring help a business?

  • There are many factoring companies, so prices are usually competitive.
  • Factoring can help a business free up time manage the business,
  • Factoring help can assists the management of cashflow.
  • Factoring often gets some customers to pay more quickly
  • Factoring can help get useful information about the credit standing of customers and they can help businesses to negotiate better terms with suppliers
  • Factoring help can prove an excellent when planning business growth.
  • Factoring can help protect businesses from bad debts if they choose non-recourse factoring.
  • Factoring can help release cash as soon as orders are invoiced.
  • Factoring can help free up available capital for investment and funding of future orders.
  • Factoring can help identify which customers are credit worthy
  • Factoring can help businesses trade with better quality customers and improved debtor spread

Why should I consider factoring?

Factoring can really help with business problems such as lack of cashflow or increasingly bad debts

What industries can factoring help?

Factoring can help a many business types and sectors. Over the years many trades have built up a particular reliance with factoring companies and it’s a common occurrence for some industries to always use a factoring company to help with the cashflow cycle. The top three sectors that rely on factoring are:

  • Recruitment/employment agency businesses
  • Hauliers
  • Printers.

How can factoring help a recruitment/employment agency business?

Over the years the recruitment or employment sector has become almost “bread and butter business for factoring companies because factoring can help fund the salaries of short and long term temporary staff out on contract.

  • Factoring can help provide the much needed cashflow needs that can be daily, weekly , bi-weekly or monthly
  • Factoring can help reduce the administrative costs of recruitment businesses.
  • Factoring can help with the payroll processing.
  • Factoring can help with the PAYE processing
  • Factoring can help with the National Insurance processing.

What type of recruitment firms can factoring help?

Factoring can and does help the recruitment industry. The recruitment industry has five main types of agencies: employment agencies, recruitment websites and job search engines, “headhunters” for executive and professional recruitment, niche agencies which specialize in a particular area of staffing, or employer branding strategy and in-house recruitment. The stages in recruitment include sourcing candidates by advertising or other methods, and screening and selecting potential candidates using tests or interviews. The common sectors in the recruitment industry that require factoring help are the following:-

  • Agencies providing temporary IT staff.
  • Agencies providing medical personnel.
  • Agencies providing security guards.
  • Agencies providing seasonal workers.

How can factoring help a haulage or transport business?

Factoring can and does help the entire haulage, transport and freight forwarding industry comprising the following:

  • Trailer services
  • Ocean freight
  • Airfreight forwarding
  • International removals
  • Warehousing
  • Logistics
  • Haul marine.
  • Container haulage
  • Storage
  • Handling and associated activities
  • Haulage of containers between ports and inland towns
  • Local distribution of containers from inland UK terminals
  • Freight transport by road
  • Haulage contracting
  • Express parcel collection and delivery throughout the UK, Ireland and internationally.

The above sectors within the haulage industry share the common problem of cashflow. The whole sector needs a lot of disposable cash to pay expanses such as:

  • Fuel
  • Trailer Hire
  • Taxes
  • Duties
  • Salaries
  • Working capital.

The problem within the sectors is waiting to be paid. Factoring can help the haulage sector manage their sales ledger and cash flow needs and problems arising from instances such as:

  • Seasonal constraints particularly of the agricultural sector.
  • Customers withholding payments
  • Credit insurance protecting customers going bankrupt.
  • Cost relating to servicing of vehicles
  • Funding to acquire commercial vehicles and trailers
  • Acquiring capital intensive equipment
  • Cashflow guidance or advice

How can factoring help a printing business?

Business insolvency rates in the print, paper and packaging market seem to increase year-on-year, according to statistics. In the print sector cashflow is tight and often non predictable and insolvency is an often common occurrence. Businesses in the printing sector can therefore not afford to be complacent. One of the only methods to avoid non-payment of invoices within the print sector is to be more aggressive in the debt collection process.

Why do many businesses within the printing industry use factoring?

  • Advances up to 90% or higher of your eligible receivables within 24 hours.
  • Factoring of only the invoices the business needs.
  • Factoring products and solutions that are tailored to the UK printing industry

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