Factoring

Factoring provides businesses the ability to protect cash flow by selling on a proportion of its debtors to provide cashflow.

The debt is sold to a third party at a discount, in return they will process the invoices and allow you to draw loans against the money owed to your business. Essentially, these companies provide a debt collection and ledger management service.

It is commonly used by businesses to improve cashflow but can also be used to reduce administration overheads. The companies providing these services will collect the debt, saving your business the need to manage the debt.

This method of business funding is suited to start-ups and companies experiencing rapid growth, the more your sales book grows, the more funding you can potentially obtain.

There is no guarantee that the factoring company will advance funds on all of your accounts payable, if the customer is a credit risk, you are selling to overseas companies, sales have very long credit terms, or you have very small value invoices.