What is Invoice Factoring?
An invoice factoring provider will advance you up to 95% of the value of a customer’s payment within 48 hours of you raising the invoice, which is why it’s also known as accounts receivable factoring.
The finance provider will then manage your sales ledger and credit control by liaising with your customers and collecting payments on your behalf. The result is a steady flow of readily available funds and more time to run your business.
No more waiting for customer payments, delayed investments or walking a tightrope through your financial obligations. Around 45,000 UK businesses in the B2B sector are turning to invoice factoring to address their cash flow blockages and realise their financial potential, and this number is on the rise.
Let’s set the scene…
You’re a business owner with a turnover of £100k or more (although some providers will consider start-ups). You’re having issues with late customer payments and simply don’t have the time or resource to chase, persuade or cajole. The answer could be to work with an invoice factoring company who will ‘buy’ your invoice from you for a small percentage.
Find out the difference between invoice discounting vs factoring in our comparison guide.
The process is simple:
- Rather than sending your invoice to the customer, you send it to the invoice factoring company (let’s call them Company X). From your point of view, believe it or not, that’s it. Your work is pretty much done.
- Company X will pay you a pre-agreed percentage of the invoice amount up front, typically between 70-95%. You’re free to use the funds straight away to reinvest, pay staff, order supplies, pay bills and generally run your business as you want to.
- Company X take responsibility for issuing the invoice and collecting payment from your customer.
- Once they receive full payment from the customer, Company X send you the remaining balance of the amount owed, minus an agreed fee.
The fees you pay will vary depending on which provider you use, which is why it is important to get at least three competitive quotes. They will work out a rate based on your turnover, number and value of invoices. On average fees will fall between 0.5% – 2.5% of your turnover.
How we can help
WhatCost can simplify your decision by providing you with up to 3 quotes from rated and professional providers only. We have established relationships with the top invoice factoring providers in the UK and can put you in touch with those best suited to your business. They will provide you with full, tailored quotes so you can make an informed decision.
There is no fee for using this service, no obligation to take any of the quotes forwards and no increase in the factoring provider’s fees.
In many cases you will receive better rates than going to the provider directly as they are in active competition with rival companies.
You find the best provider for your business at the best rates, we make a small fee from the provider for finding them a new client and the provider builds a new relationship your business. In short, everyone’s a winner!
BEWARE: It is possible to obtain quotes online via comparison search engines and some provider websites. We advise against this as these quotes tend to be based on automated algorithms that do not take the specifics of your unique business into account. In most cases, the initial quote given does not represent all of the fees involved and cannot answer questions about the quality of the service.
We strongly recommend comparing multiple quotes to make sure you’re getting the best deal. We can arrange no obligation quotes from the UK’s most trusted invoice finance providers. Complete the form below and we’ll be in contact within 1 business day.