Invoice Factoring

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

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

Compare your 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 directly into your bank account, usually within 24 hours
  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. You won’t need to chase the people who owe you money – the company providing the factoring service will carry out this work on your behalf. This is ideal if you don’t have an expert credit management team in-house.

If you don’t want your customers to be aware of your arrangements, you might want to consider confidential invoice discounting.

Some providers will also allow you to keep your own credit control process. This is an arrangement known as CHOCS.

With so many options to choose from, finding the right provider can feel daunting – particularly if you are a small business with relatively little experience in this area. But our job here at Touch Financial is to help you compare products and invoice factoring companies to settle on an agreement that works perfectly for you and your customers.

Who is invoice factoring suitable for?

If you want to sell your invoices to a third party factor, 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 firms that are issuing invoices with 30-90 day payment terms or sometimes longer.

Invoice factoring is used by over 40,000 UK companies throughout the UK. This service can be suitable for invoice amounts from a few hundred pounds to multiple millions, so it really is suitable for small organisations to large corporations alike. 

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 assist businesses from a wide variety of sectors with their invoice factoring requirements every day, 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 – but before you make any big decisions regarding your company finances, it’s always wise to explore all the facts.

Advantages of factoring

Disadvantages of factoring

How much does invoice factoring cost?

Our invoice finance calculator can provide close estimates as to how much this kind of facility may cost your business.

The calculator’s results are based on real prices paid by hundreds of recent Touch Financial customers. We update this tool every month to ensure it only displays current fees and rates.

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 Financial is the UK’s largest invoice finance broker. Using a credit broker like us means you can take advantage of speaking with business experts for free, before committing to your chosen provider.

We have a hand-picked panel of over 25 of the UK’s top invoice factoring companies. After a conversation with our expert consultants, we will aim to match your business with up to three factoring providers, so you can speak to each one individually and gain an understanding of how they work and how much their services will cost. 

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

You are under no obligation whatsoever to purchase our services. At the very least, you’ll leave the process with a better understanding of the products that are available, and how much it might cost to enter into a factoring arrangement. 

Our Lenders

We have a panel of over 25 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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