What is Invoice Factoring?
Invoice factoring provides the complete answer to slow-paying customers, shortage of working capital and, if needed, protection against bad debt losses. You receive cash in 24 hours against your invoice values. Plus, you no longer have to worry about having to chase your customers for payment. You'll be completely free of the administrative concerns of running a sales ledger.
There's no need for you to ever have to go through the pain of renegotiating your facility – unlike a bank overdraft.
How does Invoice Factoring Work? Invoice Factoring is a very simple, uncomplicated form of finance, however it is commonly one that is misunderstood. The essence of an invoice factoring agreement is as follows :-
- When a business enters in to an invoice factoring arrangement, it assigns the sales invoices that it issues to its customers, to a finance provider. Then, within a period of 24 hours of receiving the invoices, the finance provider will pay the business up to 90% of the invoice value in cash.
- The remaining balance – less the finance providers’ charges – is then paid to the business once the debt has been collected. The services can be applied to export as well as domestic trade debts.