Accounts Receivable Factoring Company
It’s a situation that virtually all businesses face at some time. They need to improve their cash flow whether to finance growth or to meet existing commitments. The problem is often that their customers are taking a long time to pay invoices, but they need the cash there and then. Many businesses facing this situation turn to an accounts receivable factoring company to resolve it.
Once the factoring arrangement is set up, the company pays the business a proportion of each invoice they issue – this can be as much as 95% - and then takes responsibility for getting payment from the customer. When full payment is received for the invoice the accounts receivable factoring company pays the outstanding balance to the business, minus a service fee for doing this.
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The advantages of factoring
By using outstanding invoices as assets which they are effectively borrowing against, it offers a business several advantages over a bank loan or overdraft. Firstly, there’s no need to put up any other asset as security against the loan, and secondly the costs can be far less than dealing with a bank or other lender.
When a business does decide to use a lender it has the choice of either approaching the company directly or going via a broker such like Touch Financial.
By taking the latter route and using a broker to obtain a quote, a business will also be able to get expert advice on which particular lender could be best for their needs.
How much will it cost?
Before deciding whether to use an accounts receivable factoring company it’s vital to have an idea of how much the service will cost. This will depend on a number of factors about the business and its client base. The figure will be calculated taking into account:
- The nature of the business
- How large its annual turnover is
- The credit period generally given to customers
One thing worth noting is that most businesses, when they weigh up the benefits of factoring against the costs it involves, find that the flexibility that improved cash flow gives them easily justifies the expense.
Using a broker to help choose a lender can prove invaluable in finding the most cost effective solution. Touch Financial is in daily contact with over 20 of the leading lenders and can offer expert advice on the charges each one makes and ways to reduce those costs.
Is account receivable factoring right for you?
Factoring isn’t appropriate for every kind of company. It is only a practical solution if you deal with other businesses on credit terms and do not generally accept payments in instalments. If you also have a turnover of £50.000 or more and a wide range of customers with good credit records then it could be a very effective way to build your business.
Taking the next step
If you believe that using an accounts receivable factoring company could be a good move for your business simply contact Touch Financial to talk through your options and compare quotes from the UK’s leading lenders.
You’ll find it’s a very simple process and within a day you could be introduced to factors drawn from some of the UK’s leading names.
Touch Financial is also able to offer impartial and independent advice and make exclusive deals and offers available which you simply would not be offered if you dealt directly with a lender yourself.
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Also in this section:
- Looking for a factoring company?
- Factoring company UK - Finding the best deal
- Invoice finance broker and lenders
- Invoice discounting company - The high street banks
- Overview of the independent invoice factoring companies
- The role of an accounts receivable factoring company
