What is factoring?
Factoring is a form of invoice finance that allows businesses to access working capital
tied up in invoices by releasing up to 90% of the sales ledger value within 24 hours to boost your cash flow.
In addition to the factoring of debt, the factoring company will also provide a dedicated sales ledger management service to remove the burden of chasing debtors, leaving you the time and resource to meet your day-to-day cash flow commitments.
The time delays associated with trading on credit terms mean that a business must often have to wait up to 90 days for payment from debtors, resulting in a limited access to working capital, but factoring invoices will overcome this challenge.
What are the benefits of factoring?
- The factoring company will advance up to 90% of the sales ledger value.
- Factoring can include a dedicated sales ledger management service.
- Factoring is a highly flexible form of finance for business as the level of funding grows directly in line with your sales ledger.
- The working capital that factoring invoices releases enables you to pay your suppliers before your customers pay you, potentially allowing you to benefit from early settlement discounts.
- Factoring is secured on your debtors and the quality of the outstanding invoices as security, negating the need for a detailed trading history to make it a highly useful cash flow solution for businesses of all sizes.
- Factoring can be tailored to suit the needs of your business by incorporating additional services such as credit protection, whilst confidential factoring means the factoring company will perform credit control under your business’ name if desired.
Which factoring solution is right for my business?
The majority of businesses that trade on credit terms can benefit from factoring debt. Recourse factoring is the basic factoring facility, releasing cash against your sales ledger for a recourse period of 120 days typically, although this can be as long as 150 days, during which the factoring company will also perform your sales ledger management.
Specialist factoring solutions have been specifically designed to satisfy operational differences, accounting for variances between the individual needs of the range of industries.
- Non-Recourse Factoring
Non-recourse factoring provides specialist debtor protection, safeguarding your cash flow against bad debts through debtor non-payment or protracted default (non-payment within six months), providing peace of mind.
- Confidential Factoring
A confidential factoring facility delivers all the advantages of factoring invoices and is provided on a non-disclosed basis so your clients remain unaware of your relationship with the factoring company.
- Export Factoring
International factoring solutions are also available to facilitate overseas trade, reducing the associated risks and improving your cash flow whilst assisting with your sales ledger management abroad. Other international cash flow solutions are available.
Costs vary between factoring companies and there are a number of variables which affect the charges, such as the size of your sales ledger and the type of factoring facility selected.
As the leading independent commercial finance broker in the UK, Hilton-Baird’s knowledge of the factoring market will help us to identify the most suitable finance for your business. Specialising in factoring, invoice discounting and invoice finance, we can ensure your business accesses the right level of service from your chosen provider.
Get an online factoring quote here or speak to our team of funding consultants on 0800 9774833 to find out more about how factoring debt can boost your cash flow.