How Can Your Business Benefit From Domestic Factoring?
There are two types of factoring available – domestic factoring and export factoring. As their names suggest, one is based on your clients being based solely in the UK, the other is initiated if you have clients based in other countries.
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Raising finance through banks and financial lenders
This could be through a bank overdraft or loan. When you apply for either one of these, you will need to supply:
- A copy of your balance sheet
- A copy of your profit and loss account
You will then be credit checked, the criteria for which has been tightened considerably over the last 12 months. If you are successful, you will receive your money and begin repaying it back the month after, often with considerable interest charges on top. You need to remain on excellent terms with your lender, however, as these facilities can be withdrawn at any time, at short notice.
Raising finance through domestic factoring companies
Domestic factoring is the term used whereby when you issue a customer invoice, you also send a copy of that invoice to your factor and they immediately release a pre-agreed amount to you, often with 24 hours. The remainder of the invoice, minus their service charge, is released to you once your customer has paid the entire amount.
If you find that several of your customers are not paying their invoices on time, you could ask your factor to take over the credit management side of your business. They will then assume the responsibility of recalling all bad debts, saving you time and money, as customers often respond faster to a third party debt collector than they do to a direct supplier.
When applying for domestic factoring, the potential factor will not look at your credit history but that of your customers. As long as your turnover exceeds £50,000 per year and you issue credit terms of between 30 and 90 days, you are likely to be a suitable candidate. The only asset you need is your outstanding debts.
In this way, there are no debts to be paid off, you are under no threat of having any credit facility removed at short notice and the strain of having to spend unconstructive time chasing customer payments is removed.
For many UK businesses, therefore, it makes sense to opt for a more stable form of raising additional finance, such as factoring. In addition, your available funding usually increases as your business grows, helping you to expand and develop.
How Touch Financial can help
With over 25 combined years of experience in helping thousands of UK businesses with their financial problems, Touch Financial offers a free, confidential advice service. If you are interested in applying for a domestic factoring or any other financial solution, telephone us on 0845 388 9725 or you can compare factoring quotes instantly online >>
We are an independent broker and so our advice is completely impartial. We work with a handpicked selection of over 20 of the UK’s leading lenders, including Lloyds TSB Commercial Finance, Royal Bank of Scotland and Bibby Financial Services, often being able to negotiate special rates of interest and offers, so you can be assured that you are receiving only the best advice and financial solutions available for your individual business needs.
Our service is entirely free, making our commission from our third party financial providers. We respond quickly to all enquiries, matching the majority of our customers with an appropriate provider and solution the same day.
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Also in this section:
- Business debt factoring overview and how it works
- Is export factoring right for your business?
- Could your business benefit from domestic factoring?
- What is commercial factoring and how could your business benefit?
