Factoring is an excellent way for fast growing businesses to manage their cash-flow, in particular where sales invoices are directly linked to the company growth and development.

Factoring allows your company to:

·        Receive payment quickly

·        Avoid the difficulties of collecting bad debt

·        Provide badly needed cash flow

·        Borrow money secured by your company’s debt.

·        Receive between 90%-95% of your invoices quickly.

Imagine how much more business your company could achieve without having to chase bad debt.  Factoring reduces administrative cost associated with debt collections and provides an easy way of turning your invoices into cash.

However there are some points to consider before choosing factoring as an option:

• The factoring company maintains your sales-ledger, therefore dealing directly with your customers

• Cost of factoring may vary depending on the nature of the debt and invoices.

• Some customers may prefer to deal directly with you. 

There are two types of factoring to be considered:

Recourse Factoring: This is where the final responsibility for collecting the debt rests with the company and any default will be your ultimate responsibility. The factor does not risk bad debt and all the charges will still have to be paid whether the debts are collected or not.

Non-Recourse: Factors accept the bad-debt risk, which are specific to the agreement and it is more expensive than recourse factoring. Factors take over all your rights to pursue the customer for payment. This includes the right to take legal action.