Factoring UK – Who ‘s in the loop and why

Factoring UK is a big industry with almost 50,000 businesses receiving just under £18 billion of finance in the most recent quarterly figures issued by the Asset Based Finance Association (ABFA).

ABFA is an umbrella organisation representing the interests of most of the UK’s major factoring services.

The common theme for all these businesses is they had billions unlocked from their balance sheets as working capital instead of sitting representing dead money as trade debtors.

The finance released covers domestic, import and export sales.

Businesses that take advantage of factoring UK are across all sectors – mainly in manufacturing, distribution and services.

They all had a need – to increase cash flow so they could expand when growth was stifled because the need to pay suppliers came round quicker than they could bring the money in from customers.

These figures demonstrate Factoring UK is big industry with a healthy customer base.

Factoring services are especially important now as traditional bank funding is withering away.

Businesses are presented with a flexible, fast access to cash by debt factoring that is offered as invoice factoring or invoice discounting.

How much cash could you release from your unpaid invoices? Compare quotes online >>

Factoring vs. Invoice Discounting

Invoice factoring

Taking 22,000 clients and turning over £5 billion in a quarter, invoice factoring has several key features:

• Your sales ledger is managed by the factoring service
• You send a copy of each invoice issued to your factoring team
• The invoice is processed and your business receives up to 90% of the face value including VAT back within 24 hours
• The factoring services receives full payment from the client, deducts a service charge and interest on the prepaid amount and transfers the balance to your bank

Invoice discounting

With 20,000 clients and turning over £44.5 billion a quarter, invoice discounting obviously has features that appeal to businesses:

• Your business retains control of the sales ledger
• You receive a payment for up to 90% of the trade debtor value on your balance sheet including VAT
• Your business is responsible for collecting invoice payments

Debtor days outstanding

This is a clincher for most businesses. According to ABFA, the average debtor days outstanding across the factoring UK business is 64 days.

For these businesses taking factoring services, this means they receive up to 90% payment of their invoices two months ahead of expectation and instead of all that cash being unavailable, it’s there to put to use in the business.

Less red tape, more action

With these figures, it’s easy to see why businesses are choosing factoring services rather than traditional bank funding.

Other advantages include no calling in of loans or overdrafts and no assets tied up as security.

Factoring is a fast moving, flexible finance option that allows the managers to grow their businesses and take on bigger volumes in confidence that the finance will be in place to deliver the goods.

The question is can your business afford not be part of Factoring UK?

How much cash could you release from your unpaid invoices? Compare quotes online >>

Also in this section:

• Overview of invoice factoring
• Factoring UK – Who ‘s in the loop and why
• How to find the best factoring quotes
  
• Benefits of a factoring service
• Factoring invoices is beneficial for young businesses
• The benefits of using business factoring
• Understanding a factoring service