While many lenders use a credit scoring system when lending money, fast invoice factoring provide businesses with a quick and easy alternative to get the funding they need.
Quick Invoice factoring, also called accounts receivable financing, is a type of short-term funding in which businesses sell their invoices to a third party at a discount.
The third party, called a factor, provides the business with an upfront payment that is less than the total value of the invoice.
The business then uses the funds to cover operational expenses and grow their business.
When the customer pays the invoice, the factor remits the remaining balance, minus a small fee. Invoice factoring is a popular financing option for businesses because it is easy to obtain and can provide much-needed funding quickly.
However, it is important to compare offers from different providers to ensure that you are getting the best deal.
Unlike traditional business finance which can take days and weeks to be approved, quick invoice factoring is processed much quicker, often within 24 hours of application.
Quick invoice factoring facility
Quick invoice factoring facilities are a type of finance that is offered to businesses that deal with other businesses.
A quick invoice factoring facility is a service that allows businesses to sell their invoices to a third party for a fee. This can be a useful way to raise money quickly, as it does not require the business to take on debt or give up equity in their business.
However, it is important to understand the fees associated with this type of service, as well as the risks. When businesses factor their invoices, they are essentially selling their future income at a discount.
This means that they will receive less money than they would if they waited to receive payment from their customer. As a result, businesses should carefully consider whether quick invoice factoring is the right choice for them.
The facility allows you to receive payments for unpaid invoices before your customer pays you. This means that you no longer have to wait 30,60 or 90 days to get paid
How does quick factoring work?
Quick Invoice factoring will require your business to sell the control of its accounts receivable, either in part or in full. It works like this:
You provide goods or services to your customers in the normal way.
You invoice your customers for those goods or services.
You “sell” the raised invoices to a factoring company. The factoring company pays you the bulk of the invoiced amount immediately, typically up to 80-90% of the value, after verifying that the invoices are valid.
Your customers pay the factoring company directly. The factoring company chases invoice payment if necessary.
The factoring company will then pay you the remaining invoice amount , lees their fee once they’ve been paid in full.
When should your company use quick factoring?
Your company should use quick invoice factoring if you routinely have a lot of invoices outstanding and your cash flow is suffering because of it.
A perfect example is if your business offers credit terms say on 30-day payment terms. Most of your debtors will pay within 30 days, some may require chasing. Some of your slower paying customers may go over the time period and require more persistent effort on your part. That 30-day chunk of revenue might represent the bulk of your potential cash flow, but you can’t actually use it.
Quick invoice factoring allows you to release that cash almost immediately, or at least a large part of it.
You could use that money that has been released to:
- Bridge short-term expenses
- Repay a loan
- Take advantage of seasonal business opportunities
- Cashflow is throttled
Advantages of quick factoring
Improved and more predictable cash flow – By using quick invoice factoring, you can have the bulk of your invoices paid almost immediately rather than having to wait for the money to come in (potentially after extensive chasing on your behalf). It makes business planning and forecasting more accurate and allows you to take advantage of opportunities that might otherwise be unaffordable.
Better chance of your business surviving – Better cash flow gives your business a better chance of survival. Many businesses fail due to poor cash flow, and invoice factoring can keep yours healthy – as long as you use it wisely.
Cheaper and easier than a bank loan – Quick invoice factoring is usually cheaper than a bank loan and easier to obtain, making it good for short-term funding needs. It also takes the hassle of debt management out of your hands. Depending on the size of your customer base, that could be a big saving.
Reduces your business overheads – Quick invoice factoring services could reduce your business overheads. While there are fees associated with factoring, they may be less than the cost of paying dedicated credit control staff. Quick Invoice factoring may also improve the morale of people working in your accounts department, as chasing payments is often stressful work.
Disadvantages of quick factoring
Unsuitable for businesses with few customers – Quick invoice factoring isn’t suitable for companies with only a handful of main customers. Factoring companies prefer to spread their risk as widely as possible. They try to avoid a high concentration of invoices to just a few customers.
Requires a big commitment – Although it’s sometimes possible to factor a small number of invoices (known as selective factoring or spot factoring), most factoring companies will want to take over the bulk of your accounts receivable. They may also try to tie you into a long contract, which could be two years or more. This is necessary from their perspective, but it means you can’t just dip in and out of quick factoring at any time. It’s a major business decision.
Costs more if your customers are risky – Factoring companies do their best to accurately determine the risk of late payment or non-payment of debt. This means they will assess your customers carefully. Their fees will reflect their perception of credit risk – if you or your customers are deemed high risk, fees will be high.
Extra costs when it doesn’t work – There may be extra disbursements to pay if your clients turn out to be worse payers than expected. If a customer fails to pay, you may have to repay the amount the factoring firm has already paid you, unless you pay extra for non-recourse factoring. In short, don’t expect a factoring company to take over your bad debts for nothing. They’re in business to make money, just like you.
Can harm your relationships with customers – When you factor invoices and the credit control is handled by the factoring company, you are handing over some of the control over your customer relationships too. If the quick factoring company pursues the debt in a cold or aggressive manner, you risk your customers being put off working with you in future. They may also view the involvement of a factoring company as a sign your business isn’t doing well.
Quick invoice factoring calculator
If you would like to work out how much your business could lend and what the repayments might be, our handy invoice factoring calculator will help. Simply input the relevant figures and see exactly what funding you could be eligible for.
Receive a decision in 60 seconds and funding in days
Invoice Funding’s quick factoring facilities are speedy for a reason. The know that business owners don’t have much time to go through paperwork and wait for a decision. By using our quick quote tool will provide you with a funding decision in 60 seconds.
Once you have applied successfully our friendly sales team will make contact with you. The love to work on quick uncomplicated application, whilst offering a friendly service.
How do you qualify for quick invoice factoring?
To qualify for quick invoice factoring, you need to trade with another business. Your turnover needs to be over £100,000 per year. You then need to place an enquiry with our online sales enquiry portal.
Seasoned professional with a strong passion for the world of business finance. With over twenty years of dedicated experience in the field, my journey into the world of business finance began with a relentless curiosity for understanding the intricate workings of financial systems.