Invoice Factoring

Factoring is a type of finance designed to help businesses who issue invoices to business customers. It enables you to sell your invoices for an advance payment on the day they are created, rather than waiting 30+ days.

Waiting for payment for extended periods of 30 days or more can lead to cash flow problems for your business. Instead, a factoring partner may advance you up to 90% of the invoice value when it is issued. The balance, minus any fees, will follow when your customer pays.

Compare invoice factoring options

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How does invoice factoring work?

  1. Complete your work as you normally would to fulfil your customer’s order
  2. Raise your invoice as usual, and send it on to your customer
  3. Send a copy to your factoring partner. They will process it and verify with your customer
  4. Receive up to 90% of the invoice value, usually within 24 hours, directly into your bank account
  5. Your customer pays the factoring provider. They pay when the invoice is due rather than paying you directly
  6. The factoring company will forward the balance to you less any prearranged fees

Your provider will collect payments directly from your customers. So with factoring you won’t have to chase for payment. This is ideal if you don’t have an expert credit management team in-house chasing payments.

However, you may not want your customers to be aware of your arrangements. In which case, you might consider confidential invoice discounting.

Some providers will also allow you to keep your own credit control process. This is an arrangement known as CHOCS.
We can help you compare products and compare invoice factoring companies.

Who is invoice factoring suitable for?

For factoring, you need to be a business-to-business (b2b) operation, selling to established businesses. You will need to be issuing invoices to your customers.
Factoring is suitable for businesses issuing invoices with 30-90 day payment terms or sometimes longer.

It can be suitable for invoice amounts from a few hundred pounds to multiple millions. Invoice factoring is used by over 40,000 UK companies – from small businesses to large blue-chip corporations.

Providers all have different rules for the types of business they work with. However, most will expect you to have been trading at least 12 months.
Most will also require you have a net turnover in excess of £50,000.

We work every day with businesses from a wide variety of sectors, including:

Advantages and disadvantages of factoring

As with all finance products, there are pros and cons attached to invoice factoring. Many of the advantages of factoring are immediately obvious. However, before making any big decisions regarding finances, it’s always wise to explore all the facts.

Advantages of Factoring

Disadvantages of Factoring

What are the costs involved?

Costs to factor invoices will vary depending on the provider you choose. However, you can typically expect to pay a service fee and a discount fee (or interest).

Our invoice finance calculator provides close estimates of how much a facility may cost your business.
The calculator is based on the real prices paid by hundreds of recent Touch customers. Unlike most calculators, we update ours every month to ensure current fees and rates are used.

Debentures

A debenture is an agreement between you and the factoring provider. Debentures are public because they are lodged at Companies House. They provide security for the factoring provider. Not all factoring companies issue a debenture in all cases. Find out more about debentures.

Compare invoice factoring companies

Touch is the UK’s largest invoice finance broker. Using a credit broker means you can take advantage of speaking with business experts for free.
We have a hand-picked panel of over 35 of the UK’s top invoice factoring companies. After a conversation with our expert consultants, we will try to match your business with up to three factoring providers.

There is a lot to consider when choosing a company to work with – our team can help you make that decision.

Some of the things we will take into consideration include:

  • Your business size, sector, location and trading history
  • Your customers’ size, sector, location and trading history
  • The nature of your work
  • The size and frequency of your invoices

Our service comes with no obligation.

Alternative products

Invoice factoring isn’t right for everyone or every situation. Fortunately, we can help you with a number of other financial services.

Areas we are happy to discuss with you include:

To discuss your options further, please do not hesitate to get in touch.

Would you like more information on invoice finance?

Download our free guide

Our Lenders

We have a panel of over 35 hand-picked funders and we are confident we will be able to help you in selecting the right one for your business needs.

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