Factoring and Invoice Finance – Advantages and Disadvantages

What Are the Advantages of Factoring Over Other Types of Finance?

Speed – Factoring and Invoice Discounting allow you to capitalise on your invoices with a minimum of delay. You can get up to 85% of the invoice within 24 hours, helping to maintain a good working cashflow rather than requiring you to wait 30/60 days for a customer to pay (If they pay on time!).

This is particularly useful if you get a large order that requires you to spend on stock and production costs before you get paid; factoring allows you to accept the order with much less risk to your cashflow.

Cost – Factoring your invoices is cheaper than using credit cards, overdrafts and many other forms of finance. Factoring also gives you set fees, whereas credit cards and overdrafts costs can build up if you keep using them and not paying them off in full.

Time Saving – Rather than having to chase debts, factoring usually means the invoice finance company will collect the money themselves; saving you time and effort that you can use to benefit your business in other areas.

Security – Factoring does not require you to risk your home or business assets as security on the finance, as the money is secured on the sales you have already made. Bear in mind though that some factoring companies will not want to factor risky invoices; as they carry the risk rather than you.