CHOCS

You can think of CHOCS, or CHOCC, as essentially being a hybrid product of invoice factoring and discounting. The acronyms are interchangeable (Client Handles Own Collections or Client Handles Own Credit Control, just pick your favourite) but mean the same thing. You are in charge of chasing the payments owed on the invoices you finance.

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CHOCS or CHOCC invoice finance - business owners discussing finance options

Confidential invoice discounting can sometimes be too risky for new companies or start-ups. This is a method of financing invoices where the process remains undisclosed so your customers are unaware that you are financing your invoices. This is because they pay into a trust account which is in the name of your business, although the account is handled by your funder. To qualify for discounting, businesses are required to have an established method of credit collection already to prove that your clients pay when they should. Without this, funders can’t guarantee that they’ll be repaid by your customers after advancing the money to you.

The 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.

A CHOCS facility is good for companies who don’t qualify for discounting by being too young, not having their own established credit collection or by not having a high enough turnover. By taking control of the collection, your funder won’t contact your clients so you can maintain a good relationship with them.

CHOCS can sometimes work out cheaper without the extra admin costs involved with having the financier chasing your clients for payment.

It is also better suited to companies who have 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.

Keep your personal relationships intact by using CHOCS for your finances, but remember that it’s still disclosed so your clients will know it’s taking place.

To talk to us about arranging a CHOCS facility, give us a call or fill out the form below and one of our expert consultants will get in touch.

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