You can think of CHOCC, or CHOCS, as essentially being a hybrid product of invoice factoring and discounting. The acronyms are interchangeable (Client Handles Own Credit Control or Client Handles Own Collections) but mean the same thing.
You are in charge of chasing the payments owed on the invoices you finance.
CHOCC vs Factoring and Confidential Invoice Discounting
Confidential invoice discounting is a form of invoice finance which is, not surprisingly, confidential. You chase your customers for payment and they pay into a trust account in your name. This means they won’t be aware you are using invoice finance.
However, invoice discounting is relatively risky for the funder. It can be hard to arrange if you are an early-stage business.
To qualify for invoice discounting, your business needs to have an established method of credit collection. But you also need a track record that proves that your clients pay on time. Without this, funders can’t guarantee that they’ll be repaid by your customers after advancing the money to you.
An alternative is invoice factoring, which is disclosed and customers pay your financier directly when the invoice is due. This also means the financier is the one to deal with your customers rather than you, making them aware of the financing facility.
There is also a hybrid service available: CHOCC (also known as CHOCS)
CHOCC – “Customer Handles Own Credit Control”
CHOCS – “Customer Handles Own Collections”
This essentially means you chase your customers but they pay the invoice finance provider rather than you.
Who uses CHOCC / CHOCS?
A CHOCC facility is good for companies who don’t qualify for invoice discounting by being too early stage. You would have to show you have the capability to chase invoices as your funder won’t be contacting your clients.
CHOCC can sometimes work out cheaper without the extra admin costs involved with having the financier chasing your clients for payment.
It is also good for companies who raise multiple invoices of lower value (for example, one of £50, one of £100, one of £150 etc.). Unlike with a factoring arrangement, your funder doesn’t have to chase a large number of clients on your behalf.
CHOCC finance facilities help you maintain relationships with customers, but remember that your clients will know it’s taking place.
To talk to us about arranging a CHOCC facility, give us a call on 0207 001 9142. Alternatively, complete our form and one of our expert consultants will get in touch.
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