Factoring Overview
The biggest challenge to new businesses is waiting for up to 60 days for an invoice to be paid. This is particularly, relevant if your company is growing on a daily basis and you are adding new customers regularly, you can often end up with a lot of money tied up in unpaid invoices. This is where Factoring can help you to grow your company in those important first few months.
Traditional methods of securing financing are to take the bank loan or overdraft from your account supplier. Factoring differs from these methods in three main ways.
1. The emphasis in factoring is on the value of the receivables, not on the credit status of the client
2. Factoring is not a loan, it is the purchase of an asset (the receivables)
3. A bank loan involves two parties where as factoring involves three
Reasons for factoring could involve a company that holds a lot of capital in unpaid invoices who wish to sell those receivables, sometimes at a discount to the face value of those assets, when it calculates that it will be financially more secure with the proceeds to support their business, and then they would be by functioning as their client’s bank.
Factoring can provide your company with a professional credit management service that will allow you more time to concentrate on your business. A Factor will agree procedures with you and send out statements whilst leaving you in control of your customer relationship.
Alternatively if you are an established company looking to use a Factoring service for the first time then call Source Commercial Finance for help and advice. We can negotiate and arrange a Factoring agreement that will suit you.
For more information or to arrange a no obligation meeting with one of our advisers please contact us on the link below.