Commercial Mortgages, Remortgages, Asset Finance and Business Loans

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Factoring

Factoring is the process of releasing cash from invoices as soon as they are issued, allowing you to put the money where it is needed most.

Ordinarily you would issue an invoice and wait a set period, usually 30 days, to receive payment or chase payment. This effectively ties your money up in that invoice, that is OK if you run an organisation turning over billions of pounds a year but as a small to medium business that could have a negative effect on your cash flow.

How much cash can factoring release?

Factoring services set out to release up to 85% of the value of an invoice within a couple of days of the invoice being issued, typically you could receive cash advances within 24 hours.

Outsourcing the management of your sales ledger

There are two parts to a factoring service, the first is discussed above, which is the release of cash from qualifying invoices as soon as they are issued. The second is concerned with the management of your sales ledger.

With factoring service you could release the burden of running your sales ledger, which involves the management of invoices and the collection of unpaid invoices. With factoring services you can outsource the running of your sales ledger and payment control services.

Running your sales ledger requires sufficient information systems and head to process invoices and payment collection. Relieving the burden of your sales ledger can be more cost efficient and an effective way to manage invoices. In many cases factoring is more cost effective than taking on extra headcount and purchasing technology to help the management of your sales ledger.

The difference between Invoice Discounting and Factoring

Although outsourcing your sales ledger is an integral part of factoring, you do not have to do so in order to release cash in your invoices. Factoring is a service, which is under the broader umbrella called invoice finance, under invoice finance there is factoring and invoice discounting.

With invoice discounting you get to enjoy the liberation of having cash released immediately from qualifying invoices. As with factoring, you can release up to 85% of the value of invoices and have the cash typically within 24 hours of the invoice being issued.

Invoice discounting, unlike factoring, allows you to retain control of your sales ledger, because of this invoice discounting is typically aimed at large organisations who have adequate processis and bodies in place.