FACTORING
Factoring is the process of releasing cash from your invoices as soon as they are
issued, allowing you to put the cash where it is needed most. It is a flexible form
of loan, which advances money to a company as it issues new invoices. This is different
to overdrafts or more formal loans, which are usually for a fixed amount.
The factoring company charges a fee, usually a very small percentage of the value
of each invoice, and interest on the amount of money borrowed. Often at the start
of a new factoring relationship, the factor will take on existing debtors, which
can involve a very substantial payment being made right at the start.
Setting up a deal can be done far more quickly than most other forms of finance.
Skipton Business Finance can put the facility in place inside 5 working days and
there is no need to change your bank or bank account.
Factoring is commonly
used by companies to improve cashflow but can also be used to reduce administration
overheads. Companies that supply this service are called factors.
Factoring is generally only appropriate for business to business organisations.
As invoices are paid by a financing company to cover a credit agreement, it isn't
suitable for B2C companies such as retail stores as all invoices are paid up front.
The advance of cash is not the only attraction of factoring - because the administration
of invoicing and chasing invoices is done by the factor, freeing up valuable time
to concentrate on running your business.
Factoring comes in either Recourse or Non-Recourse. Non-Recourse is the full-service
solution with the factor also providing bad-debt protection. The more popular option
is Recourse, where the client must provide the funding should the customer fail
to pay the invoice.
Skipton Business Finance can advance up to 90% of each invoice that you issue and
then collect the invoice when it becomes due and pay the balance back to you.
The majority of our clients take advantage of the Skipton Link on line facility
that allows you to notify SBF of invoices electronically via the internet as well
as draw down monies direct into your bank account at the touch of a button.