Factoring is a service provided by a business finance company: that could be a branch of a high-street bank or a smaller industry specialist.
Basically, factoring is short-term lending that is guaranteed by giving the lender the right to collect your revenue from a customer you have invoiced. The lender gives you 85% of the invoice value up front: often within 24-hours of you raising the invoice for your customer. The lender then collects the full invoice amount from the debtor, takes the 85% + their reasonable fee, and hand you the balance.
There are many descriptions of factoring being: Debtor Finance - Invoice Finance - Trade Finance - Invoice Discounting (similar to Factoring but for businesses that are well established and with a annual turnover in excess of £250k) they are basically all the same.
I have no trading history will this count against me? One of the major attractions of factoring is the reliance on your customers credit standing, and NOT your own. In fact, your credit record may not be good enough to get finance, but it's not you that has to pay the invoice.
Do I have to repay the factoring company if the invoice is a write off?
Simply, NO. The factoring company act as your credit control staff, and they also accept full responsibility for the customers conduct as to meeting the payment when the invoice becomes due.
I give my customers 60 days credit. Is this a problem?
Again, NO. Some clients offer 90, 120 and even 6 months credit. Factoring is very much a personal service. The factor is well aware of the individual payment terms that are required to secure business in a competitive world.
I only want to factor some of my customers invoices. Is this OK?
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