UK FACTORING FAQ

What is factoring?

Factoring is the process whereby a factoring company buys a business' outstanding invoices. Basically, factoring is short-term lending that is guaranteed by giving the lender (the factoring company) the right to collect your revenue from a customer you have invoiced.

What does a factoring company give a business in return?

The factoring company gives the business 90% of the invoice value up-front then collects the full invoice amount from the debtor, taking the 90% and their fee and handing the business the balance.

Factoring offers a business almost immediate access to finance, typically the factoring company will give the business 90% of the invoice they have raised within a 24 hour period.

Who provides factoring?

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.

What is factoring otherwise known as?

Factoring is also known as debtor finance, invoice finance, trade finance and invoice discounting, although invoice discounting differs from factoring.

What is the difference between factoring and invoice discounting?

Invoice discounting is similar to factoring in that you can get an advance on your invoices but unlike factoring you can still handle the invoice process. To qualify for invoice discounting, however, a business must have an annual turnover in excess of 250K.

What is the main benefit of invoice discounting over factoring?

The main benefit of invoice discounting over factoring is that there is a smaller service charge and you can use your own credit management system. As a result, you can continue to your own customers, unlike factoring where the factoring company handles with invoicing.

Why use a factoring company?

Factoring gives you cash flow when you need it, and the amount you need. Unlike a typical business overdraft which can lack the required flexibility at required times, factoring is a certain and is authorised way in advance of supplying your services or goods.

What are the main benefits of a business using factoring?

There are a host of benefits to be gained from using factoring:

No Trading History Required - factoring relies upon the credit standing of your debtors, not your own

Debt Write Off Cover - with factoring, you can cover against write-offs. Regardless, a factoring company will be very experienced and skilled in recovering full credit amounts from debtors

No Infringement Upon Original Terms - factoring is a personal service and is flexible enough to appreciate the original terms of an agreement

Selective Factoring - with factoring, you do not have to sell all invoices, it is the choice of the business which invoices are used for factoring

UK Business Finance, sponsored by UKCashflow24

This guide to UK Business Finance is sponsored by UKCashflow24.

UKCashlfow24 are one of the UK's leading business finance companies.

Whatever your trading status, UKCashflow24 can offer you a host of business finance options including business loans, factoring, invoice discounting, lease finance, commercial property loans and asset finance.

Regardless of the circumstances of your business, UKCashflow24 will explore all avenues to provide you with the best business finance solution.