Questions most asked about the factoring process

What Is Factoring?

It is an arrangement between a Factoring Company and a business whereby the Factoring Company provides typically up to 95% cash available against the unpaid invoices of a business. A Factoring Company also relieves the burden of routine tasks such as sales ledger management, credit control and credit checking.

Why Won’t The Bank Increase My Overdraft?

Because debtors are often the most appropriate asset to provide security for working capital. The bank is not able to control debtor risk and you need flexibility to develop your business to its full potential. Factoring and Invoice Discounting are ways to increase your working capital and allow your company to grow.

Why Invoice Finance (Factoring Or Invoice Discounting)?

Invoice Finance provides greater security over a debtor book, that’s all they do. Consequently it is probable that more working capital will be available by an invoice financier using your debtor book as security. Invoice financing funding is more able to keep pace with your sales growth and will give you more flexibility. The other benefits of invoice financier will enable you to develop a successful business safely and give the business competitive advantages.

Debt Collectors Will Upset My Customers?

No! It is in the invoice financiers, Factoring and Invoice Discounting companies interest that you should grow the business and so they are very conscious of the need to promote good debtor relationships. They will bring professionalism and ‘big company’ power to collection practice, however credit control can be firm and professional and still be polite. You should agreed in advance to get the right balance with the Factoring or Invoice Discounting company.

Isn’t Factoring Or Invoice Discounting Expensive Though?

Not if it helps you increase profits. The funds will be very similar in cost to bank overdraft. The service fee must be viewed against the savings that can be made and the ability to increase income: 10% reduction on debtors of £100k will save circa £850 per annum (money cost @ 8.5%) plus improvement in liquid capital of £10k. Better terms from suppliers for early settlement. Discontinue early settlement discount to debtors. Postage/stationery/telephone/telex – real costs rarely evaluated. Computer costs/capacity. Bad debt costs. Legal charges. Reduce/redeploy credit control staff/premises. Release management time. Ability to grow quickly/safely

Exactly How Much Will Factoring Or Invoice Discounting Cost?

Money costs will be very similar to overdraft. Service fee will depend upon the type of facility, number of invoices, number of customers and risk assessment for credit protection if required. If you can complete the get quote information pages, we will be able to give you an accurate price indication.

Will My Customer/Suppliers Think I Am Going Bust If I Factor Or Discounter?

Not nowadays. To the contrary, many large companies welcome Invoice Finance involvement: They will get accurate statements and sales ledger administration as part of the customer’s service. They know the customer can get finance for large orders. They know the customer has access to credit protection. They will feel more confident regarding continuity of supply.

What Type Of Receivable Is Acceptable To A Factoring Or Invoice Discounting Company?

Any valid invoice for services already performed that has not been pledged to another entity will be usually acceptable to Factoring and Invoice Discounting companies.

Are Government Receivables Acceptable To Invoice Financiers And Factoring And Invoice Discounting Companies?

Yes, government receivables are acceptable to invoice financiers and factoring and invoice discounting companies?

How Do Factors And Discounters Collect?

The same way you would collect, albeit they agree a method and stick to it: you invoice your customer for the service you performed. They then take over all collection responsibilities.

Is The Invoice On Our Letterhead Or Yours?

You inform your customer that the financial rights to the invoice have been sold to a Factoring company. You continue to invoice normally. Checks are made payable to the factor and mailed to our address.

What Will My Customers Think If I Start Factoring Or Invoice Discounting?

Invoice financing is used by many of the largest corporations in the world to improve cash flow, support growth, and increase profits. Many of your customers may use this service themselves and others have become familiar with it through other vendors. The fact that you qualify for this ‘credit line’ makes a strong positive statement. Factoring and Invoice Discounting companies are help to help you grow and become even more successful.

What Is Required Before Invoice Financing Or Factoring An Invoice?

The work/goods must have been completed, delivered and accepted; and your customer must be a creditworthy risk.

Can We Qualify If We Have A History Of Credit Problems Such As Bankruptcy, CVA Liens Or Judgments?

Yes! Different Factoring and Invoice Discounting companies have different lending criteria. We can help you find the right Factoring or Invoice Discounting company to fit your circumstances.

How Do Factoring Requirements Compare To Debt Financing?

Unlike debt financing requirements, factors and discounters do not usually require a history of profitability.

How Quickly Can I Expect To Receive My Money?

Once an account has been established by the factor, you can receive cash advances usually within 24 hours on an approved credit risk.

Can We Qualify For Invoice Finance If We Already Have Existing Credit Lines Or Loans?

Yes

Can We Qualify Even If We Are Just Starting In Business And Have No Credit History?

Yes, if you have creditworthy customers

How Do You Make Money?

We do not charge a fee, instead we are paid a commission the lender / invoice finance provider

What Happens If My Customer Does Not Pay?

Non-recourse factor, assumes the risk of your customer not being financially able to pay for the services provided. However, the factor would not assume the risk of non-payment due to disputes regarding quality or timeliness of goods or services. Recourse Factoring you would assume the risk.

Are There Any Geographical Restrictions To Your Service?

Will Invoice Finance Be Good For My Business?

Yes, as long as you wisely use the additional time and cash derived from Invoice Finance. Invoice Finance can be quite beneficial if you use it as a means to increase your sales, improve your credit, take advantage of early payment discounts or focus on managing your business.

How Do I Get Started?

It’s simple. Call us or complete get a quote. We will contact you promptly to discuss the next step.

What Advance Can I Get Against My Ledger?

Up to 90% is typical of the value of each of your invoices, immediately they are raised. The percentage of invoices available to you is agreed in advance, based on the creditworthiness of your customer base, so you know how much cash will be instantly available. Naturally, the balance of your sales invoices is made available as soon as your customers pay.

What Is Factoring?

It is an arrangement between a Factoring company and a business whereby the factor provides between 75% and 90% cash available against the unpaid invoices of a business. It also relieves the burden of routine tasks such as sales ledger management, credit control and credit checking.

How Can It Help My Business?

Factoring can create immediate extra working capital, by advancing cash either the same or the following day against invoices it receives. It also allows the client to concentrate on sales and production functions as the factor takes care of the credit control process.

Why Would I Need Factoring?

If your business has inappropriate or inadequate financial facilities, a rapidly growing order book or suffers from late payment from debtors, Factoring could meet your cashflow requirements.

What Is The Difference Between Invoice Discounting And Factoring?

Both facilities provide immediate cash against invoices. Invoice Discounting is generally a confidential facility where the client continues to run its own sales ledger. A Factoring facility provides a full sales ledger and credit control service.

What Is The Difference Between Recourse And Non-Recourse Factoring?

Factoring clients can protect themselves against bad debts with a non-recourse Factoring arrangement. The factor will cover the client for bad debt losses up to an agreed limit for each customer. With recourse Factoring any bad debt is the responsibility of the client. Naturally there is an additional cost to the client for non-recourse Factoring.

Are Any Types Of Businesses Unsuitable For Factoring?

Factoring can be used for a wide range of businesses offering goods or services on credit terms. However, some types of businesses such as those involved in stage payments or long term contracts, or monthly retainers – where the work done cant be itemised and thus provable. Business that offer sale or return are also frowned upon for invoice finance.

What Criteria Must My Business Satisfy To Be Funded By Factoring?

Factoring companies will require a minimum turnover level per annum but there is usually no upper limit. Start up businesses will be considered if they have a satisfactory business plan, decent credit worthy customers and sometimes, if the director is a UK homeowner.

What Security Is Required?

Generally a Factoring agreement between the client and the factor covering purchase of debts by the factor, in addition to personal guarantees/performance warranties is all that will be required. Occasionally a debenture over book debts or guarantees from associate/parent companies will be necessary.

Can I Retain My Banking Facilities?

Yes. Factoring does not disturb an existing banking relationship. However, it is likely that any existing bank overdraft facility will be reduced on the commencement of a Factoring or Invoice Discounting relationship but the reduction will be more than compensated by the additional cash made available against invoices by the factor or discounter.

What About The Relationship I Have With My Customers?

While the Factoring company will be in direct contact with your customers, they may welcome your continued involvement in the collection process. In addition, a Factoring facility enables the client to enter into additional sales contracts with far more confidence.

How Can I Keep Up To Date With Daily Changes On My Sales Ledger?

Daily transactions are advised on paper and most Factoring and Invoice Discounting companies provide a direct modem link between the Factoring company and the client who can view their own sales ledger movements as they happen. Any disputes are also notified to clients immediately.

Can You Factor Your Exports?

Yes. The Factoring company can collect your export debt whether they are invoiced in sterling or local currency. Most factors, often using Factoring companies in the country of import, have the ability to collect the debt in the local language of the debtor and understand the collection process and legal system for collecting debts. An additional charge is normally applicable on export debts.

What Benefits Will Factoring Provide For The Future Prosperity Of My Business?

Provides immediate working capital, helps to solve cashflow problems, provides headroom for growth and frees up valuable management time to enable a business to maximise its full potential and enhances ownership value.

Are There Many Providers Of Factoring Services?

Yes. Well over 100 Factoring, Invoice Discounting firms – some are banks, some are corporations, some are small private companies.

How Do I Choose?

We will help you choose dependent on your business sector and what stage of the life of the business you are in. Please call our service is free

What Is Invoice Financing?

It is an arrangement between a Invoice financier and a business whereby the Invoice financier provides between 75% and 90% cash available against the unpaid invoices of a business. It also relieves the burden of routine tasks such as sales ledger management, credit control and credit checking.

How Can Factoring, Invoice Discounting Help My Business?

Invoice financing can create immediate extra working capital, by advancing cash either the same or the following day against invoices. It also allows the client to concentrate on sales and production functions as the Invoice financier takes care of the credit control process.

Why Would I Need Invoice Financing, Factoring Or Invoice Discounting?

If your business has inappropriate or inadequate financial facilities, a rapidly growing order book or suffers from late payment from debtors, Invoice financing could meet your cashflow requirements.

What Is The Difference Between Invoice Discounting And Factoring?

Both facilities provide immediate cash against invoices. Confidential Invoice Discounting is generally a confidential facility where the client continues to run its own sales ledger. An Invoice Finance facility provides a full sales ledger and credit control service.

What Is The Difference Between Recourse And Non-Recourse Invoice Financing?

Invoice Finance clients can protect themselves against bad debts with a non-recourse Invoice financing arrangement. The Invoice financier will cover the client for bad debt losses up to an agreed limit for each customer. With recourse Invoice Finance any bad debt is the responsibility of the client. Naturally there is an additional cost to the client for non-recourse Invoice financing.

Are Any Types Of Businesses Unsuitable For Invoice Financing?

Yes. Invoice financing can be used for a wide range of businesses offering goods or services on credit terms. However, some types of businesses such as those involved in stage payments or long-term contracts, as in the building industry, are sometimes unsuitable for Invoice financing.

What Criteria Must My Business Satisfy To Be Funded By Invoice Financier?

Confidential Invoice Discounting companies will require a minimum turnover but there is usually no upper limit. Start up businesses will be considered if they have a satisfactory business plan.

What Security Is Required?

Generally an Invoice financing agreement between the client and the Invoice financier covering purchase of debts by the Invoice financier, possibly in addition to personal guarantees/performance warranties is all that will be required. Occasionally a debenture over book debts or guarantees from associate/parent companies will be necessary.

Can I Retain My Banking Facilities?

Yes. Invoice financier may not disturb an existing banking relationship. However, it is likely that any existing overdraft facility will be reduced on the commencement of a Invoice financing relationship but the reduction will be more than compensated by the additional cash made available against invoices by the Invoice financier.

What About The Relationship I Have With My Customers?

While the Invoice financing company will be in direct contact with your customers, they may welcome your continued involvement in the collection process. In addition, an Invoice financing facility enables the client to enter into additional sales contracts with far more confidence.

How Can I Keep Up To Date With Daily Changes On My Sales Ledger?

Daily transactions are advised on paper and most Invoice financiers, Factoring and Invoice Discounting companies provide a direct computer link between the Invoice financing company and the client who can view their own sales ledger movements as they happen. Any disputes are also notified to clients immediately.

Can You Factor, Invoice Discount Or Invoice Finance Exports?

Yes. Invoice financing, Factoring or Invoice Discounting companies can collect your export debts whether they are invoiced in sterling or local currency. Most Invoice financiers, often use Invoice financing or Factoring companies in the country of import, they have the ability to collect the debt in the local language of the debtor and understand the collection process and legal system for collecting debts. An additional charge is normally applicable on export debts.

What Benefits Will Invoice Financing Or Factoring Company Provide For The Future Prosperity Of My Business?

How Do I Choose The Right Factoring Or Invoice Discounting Company For My Needs?

We can assist you. Our service is Free of charge