Factoring Service
Thousands of UK businesses, both start-ups and established organisations, are looking to a business financing process known as “invoice factoring”, in a bid to release capital held in unpaid customer invoices, a major contributor of stilted cashflow.
Provided by both banks and other lending and specialist finance institutions, factoring is the process by which the institution will immediately release a high percentage of the monies claimed by an accounts’ receivable invoice, in return for a fee and further interest for this factoring service.
Not to be confused with invoice discounting and unlike a bank loan, there are many advantages to employing factoring:
- Reduction in time and expenses chasing invoice payment
- No other assets needed to secure funding
- Competitive rate of interest charged
- Borrow as much or as little as you like
Businesses may use brokers or specialist companies to provide their factoring service. However, although most service offerings will look alike, there can be significant differences, which can have a substantial impact on your costs, so business owners are advised to seek expert help and assistance when choosing a factoring company.
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Who is eligible to use a Factoring Service?
If you are a UK organisation, dealing in business to business, have a turnover of at least £50,000 and credit terms of between 30 and 90 days, then it is likely that you will be accepted. However, many start-ups also use a factoring service, so it is best to enquire.
How much money can I free up?
It varies, but most factoring services offer an average of around 85-90% of the value of the issued invoices. When your customer pays the invoice, you are then sent the remaining amount, minus the factoring company’s service fee (which is usually a small percentage of your annual turnover or the value of the invoice) and interest charged. You will usually receive the monies within a maximum of two working days.
Be aware that some companies include additional charges as part of their factoring service. These could include a re-factoring charge, where you will be charged if the customer doesn’t pay their invoice within the timeframe agreed, or a underutilisation fee, whereby an additional fee is charged if you do not use the estimated loan value within a given figure.
What will they look at?
The factoring agents will look at the amount of accounts’ receivable invoices you have outstanding and run credit checks on all your customers, to check whether they are creditworthy. Many small businesses choose to opt for full service factoring, whereby the customer is obliged to pay the factor company, who takes full responsibility for collection (or, more relevantly, non-collection) and there is no recourse for the seller.
Why use Touch Financial?
Touch Financial is the UK’s leading factoring broker. Our dedicated team of specialists has over 60 years combined experience in the commercial finance industry and has helped thousands of businesses to release much-needed capital from unpaid invoices and ultimately, stay afloat.
We don’t just provide a factoring service. We listen to each individual customer to gauge your circumstances, needs and aims, identifying the best service offering for you and offering advice on all aspects of business financing.
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Also in this section:
- Factoring service, the right finance solution for your business?
- How to find the best small business factoring quote
- How can you benefit from business factoring?
- Factoring future cash payments
- Read more about factoring invoices
- Understanding a factoring service
