Company Factoring UK

The vast majority of businesses in the UK have thousands of pounds tied up in unpaid invoices whilst at the same time owing money to credits, staff and the government in taxes. Factoring is a form of business finance which allows your business to immediately release cash which is tied up in unpaid invoices, allowing you to pay creditors and focus on the important stuff, like growing your business.

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The Factoring process

Company Factoring UK, widely referred to as ‘Factoring’, is an arrangement that your company enters into with a Factoring lender. These lenders can be banks or other financial organisations and they are usually known as Factors.

Once a Factoring arrangement is in place, the process is as follows:

  • At the point of the arrangement being agreed, a substantial proportion, up to 90%, of the value of currently outstanding invoices is paid by the Factor.
  • The Factor takes on responsibility for pursuing the customer for payment.
  • When the customer does pay, the outstanding balance is paid to your company.

Because the Factor effectively settles the majority of your outstanding invoices at the beginning of the arrangement, you benefit from a sudden influx of cash. This can be worth up to 90% of your total outstanding sales debtors.

For all subsequent sales invoices that you raise a similar process occurs:

  • You raise an invoice to your customer for goods or services supplied.
  • The Factor immediately pays you up to 90% of the invoice value.
  • The Factor prepares statements and pursues the customer for payment.
  • When the customer pays the Factor gives you the outstanding balance.

This means your sales debtors are reduced to perhaps 10% of what they used to be, and there is more cash moving through your company.

Naturally there is a fee for using a Factoring service, but with resource freed up by the Factor managing your sales ledger and chasing payment on your behalf this cost is usually offset by your saving.

Factoring is also a more secure form of lending than a business overdraft as this facility can be withdrawn with little, or no, warning. ‘Company Factoring UK’ is much more stable as lenders typically offer customers a 12 month contract.

Other benefits of Factoring

While improved cash flow is a huge benefit to your company, it’s not the only one that Factoring has to offer.

Using a Factor means you are effectively outsourcing your credit control. The administrative overhead of raising statements and chasing slow-paying customers is taken off your hands.

This is a particular benefit for smaller companies where administrative resources are often stretched. By outsourcing the tedious and time-consuming work of credit control you or your staff can focus on more productive tasks.

The Factor, on the other hand, can perform credit control more cost-effectively because they have the benefit of economies of scale. They employ a dedicated team who perform credit control for a range of organisations.

Company Factoring UK can also be conducted on a confidential basis, if it’s important to you that you customers don’t know it’s going on.

Finding out more about Company Factoring UK

Do you want Touch Financial to give you an indication of how much cash your company could unlock from its sales ledger, and an estimate of the potential costs?

We are the UK’s leading online Invoice Finance broker. Our panel of Factoring experts have helped thousands of organisations to find the right solution for their cash flow needs.

We’re 100% independent and 100% committed to delivering best value to our customers. Could we deliver value to your company?

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