The Benefits of Credit Factoring

Factoring, also referred to as credit factoring, is finance service which allows customers to free up cash which is tied up in unpaid invoices.

With many businesses offering payment terms of between 30-90 days it is not uncommon to wait up to 120 days for payment, especially considering in todays economy it’s almost acceptable to settle payment past the invoice due date.

For many businesses this throws up all sorts of issues as cash isn’t readily available, even though the product/service has already been provided. Staff, creditors and taxes still need to be paid.

Credit factoring is a form of commercial finance allowing business owners to release up to 90% of invoices value as soon as they are issued. By effectively having your invoices paid on time you are free to use that cash where you feel it is best served.

As part of a factoring service a lender can also manage your sales ledger, credit control and collect payment from customers. Again freeing up resource in headcount and management systems which you can allocate elsewhere.

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Benefits of credit factoring to your business

• Invoices are converted into cash the moment they are raised
  This loosens up your cash flow, making it easier for you to pay suppliers and other creditors.

• The lender can take responsibility for credit control
  They raise the customer statements. They chase the customers for settlement of debts. They handle the majority of invoice queries.

• Resources can be used more effectively
  Freed from the time-consuming task of debt chasing, your administrative staff can be re-deployed to more constructive tasks.

• Business development can become a priority
  When cash is in short supply it’s easy to be forced into survival mode. Factoring releases you from day to day worries and you can focus on the more interesting and rewarding task of building the business for the future.

• Choosing the right credit factoring provider
  Now is a good time to consider factoring. There are a lot of providers, from high street banks to boutique funders who focus on a particular niche. This means there’s competition, which in turn drives down costs. However, it also means it can be difficult to select the right provider. It might be easy to go to your bank, but that’s not necessarily the best solution for your business. Their product might not be flexible enough for your needs, nor is it necessarily the most cost effective.

Independent brokers, such as Touch Financial, offer an impartial advice service. Our teams of experienced business finance consultants work with a panel of lenders, from major banks to exclusive specialists. We’ve helped thousands of organisations to find a finance solution that meets their specific needs.

Would you like instant feedback on how much additional funding Touch could help you to generate from your sales invoices, along with an indication of costs? Get an online quote now.

We’re 100% independent and we’re 100% committed to delivering the best possible value to our customers. Why not find out what we can do for your business?

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Also in this section:

• The advantages and disadvantages of small business factoring
• What you need to know about business factoring services
• The benefits of credit factoring
• Learn more about company factoring UK
  
• Invoice factoring UK explained