Invoice Factoring is a type of business finance which releases cash currently tied up in outstanding customer invoices. This business solution is ideal for helping fund expansion plans, improving your cashflow and collect payment from your customers. There are two main types of funding options: factoring and discounting. With factoring the factors provides both funding and credit control. Invoice factoring is simply a way to release the funds that’s tied up in your unpaid invoices. Instead of waiting for your customers to pay, you borrow against the money you’re owed and is a type of debt financing. Not only do you get the money you’re owed without the wait, we chase up your outstanding sales ledger for you with debt collection services.
How Does Invoice Factoring Work
In general, for an invoice funding transaction to happen, there must be a factor, a debtor and an unpaid invoice. The factor is the financial institution that offers or agrees to buy business debt or unpaid invoices. The debtor is the client who owes money to a business in the form of an unpaid invoice. Lastly, the invoice is the document that shows transactions between a business and its clients.
Here is how it works; the business raises an invoice for goods/services sold on credit to another commercial entity and then presents the invoice to the factoring company for payment (advance payment). Most factors make payments within 24 hours upon receiving the outstanding sales ledger. The business will then receive up to 95% of the unpaid invoice amounts. once payment is made the factor will collect the full invoice amount owed to the business when the invoices become due for payment, deduct its service fee and interest, which typically vary from one factoring company to another, and then submit the remaining balance to the business. It is important to note that customers that do not pay on time may affect a business’s ability to access invoice factoring services. The factor we ensure it holds the same relationship with your customers as you do, and will not do anything without your provision legally.
At Invoice-Funding.co.uk we recognise that money is the lifeline of any type of business. Our expertise and experience in cash flow solutions enables us to establish inexpensive centres that are structured in a manner that will certainly meet your company needs. Most companies just need their outstanding invoices paying on time as most of the businesses working capital is tied up in their sales ledger, this is where factoring comes in to its own with chasing late payments.
Our purpose is to guarantee that your company has an invoice finance facility that is fully enhanced. That means your prices are reduced and the money produced is maximised. We do this by taking into consideration the complete costs rather than just the headline prices of invoice factoring and by taking into consideration any restrictions that could lessen the funding generated. Our years of experience of helping companies like yours enable us to do this successfully to make sure that you the customer save both time and money. making it a great solution for businesses.
Small Businesses benefit greatly from invoice funding as most offer bad debt protection, should you not get paid or a company goes in to liquidation on you, you still get paid! Factors include this on most of their funding packages.