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What is factoring?
It has often been described as a complete cash flow service, providing the answer for many businesses to slow-paying customers and a shortage of working capital. No longer do you have to face the frustration of waiting several months for payment from your customers. In addition to improving your cash flow, factoring provides a dedicated sales ledger management service, coupled with an effective and tactful cash collection function that is tailored to your requirements.
What is factoring used for?
With factoring, you can achieve significant cost savings in infrastructure, staffing, software and management time through outsourcing the responsibility for your sales ledger operation. Factoring enables you to concentrate on new business opportunities, secure in the knowledge that your cash flow is matched to your sales and all the necessary controls are in place to ensure your success.
How does factoring work?
A quick review of the invoice factoring process:
You assign your unpaid sales invoices to a factor and within 24 hours they pay you around 85% of the value of the invoices.
The factor takes responsibility for your sales ledger operation from credit management to collections saving you significant costs.
Your customers remain unaware that the factoring facility is being used. The facility can also be disclosed to customers.
The remaining invoice balance, less the factor’s charges, is then made available to you once the debt has been collected.
How can factoring help my business?
Factoring has all the benefits of invoice discounting with the additional benefit of a dedicated sales ledger management service, coupled with an effective and tactful cash collection function that is tailored to your requirements.
What are the costs of factoring?
We will help you tailor the cost of your factoring facility to your specific business and requirements. At cash-flow.co.uk we will ensure that the pricing of your facility is transparent and clear. Typical fees charged by a factor are as follows:
Arrangement Fee - this is a fee charged to cover the due diligence on new clients.
Service Charge Fee - this is a fee that covers the ongoing servicing of your facility and will vary according to the value and volume of invoices you put through the facility.
Discount Charge - this is a percentage charge above the base rate or LIBOR, calculated daily on the money drawn down from your facility.
Legal Costs - this is a cost for putting the facility documentation in place and may include the cost of preparing and registering a legal charge over your business.
The above fees and costs are all subject to negotiation with the factor.
We will help you structure a facility that works for your business at the lowest possible cost.
Find out how factoring can give your business the cash flow boost it needs. For a FREE NO OBLIGATION QUOTE simply complete the form or call our cash flow contact centre free of charge on 0800 019 4251 to realise your potential for growth.