Factoring is a flexible funding solution that provides cashflow for all shapes and sizes of business. Provided your company has annual sales in excess of £50,000 per annum, factoring can help your business grow.

As factoring companies specialise in funding sales ledgers, it can also provide the solution to a New Start venture seeking funding lines. It is also the perfect facility for partnerships and sole traders who are unable to charge their business’s assets to a bank.

With a factoring facility, your company invoices your customers in the usual way, with a copy being sent either by post or electronically to the factoring company. Once the factor has received the copy invoice, you can draw funds up to 85% against the invoice, usually within 24 hours of raising the original invoice. In some cases this can be as high as 100%.

With factoring, the facility is disclosed to your customers. The factoring company will collect the invoices as and when they fall due for payment. The factor will also issue statements, chase debts and manage your sales ledger for you. You can also for a small additional charge insure your customers with the factoring company. Should one of your credit approved customers fail to pay or cease to trade, then the factor will credit your account with the balance outstanding. This is call non-recourse factoring.

How much does it cost?

Funding from the factoring company is generally in line with what you would expect to pay a high street bank for overdraft facilities. The norm would be between 1.5-3% + bank base rate. In addition you would also pay a service charge for the sales ledger management and collection service. This fee would be around 0.5% of sales, although should you choose to take out optional credit protection, then this fee may increase by around a further 0.25-0.5%.

Do I have to use my bankers factoring company?

No. You can choose to factor you sales ledger and debtors with any factoring company. Although each company has different criteria and some specialise in different industries. Absolute Commercial Finance is dedicated to working with you so that the facility you choose will work with your business and help it to grow. We will introduce to you the factors that most suit your company’s needs. This may indeed by your banks own factor, or one of the many independents.