#INVOICE FACTORING COMPANIES FULL#

Accordingly, non-recourse is also known as “bad-debt protection”. A recourse facility sees you responsible for the costs of any unpaid invoices - while a non-recourse facility sees the lender absorbing the costs of any default. With this lending facility - your customers would normally know that you are making use of a factoring provider.īefore agreeing terms with a lender - you would be given the option for a recourse or non-recourse facility. You would then receive the remaining invoice value - minus any service and factoring charges. Where customers fail to make payments - lenders can take legal action.Īfter a customer has paid - the money goes into the factoring company’s account.

From then on, the invoice company would be responsible for credit control - contacting customers on your behalf, when bills are due to be paid. With most lenders - the advance you will get is usually around 80% of the invoices total value. With some lenders, this invoice will be uploaded onto a secure online portal - while others will ask you for an email and/or a physical copy. How does invoice factoring work?Īfter finding a suitable factoring facility, with a lender, you would raise an invoice. Invoice factoring has grown in popularity in recent years, as it has become more and more difficult for companies to get much needed financing - from conventional banks.

Companies with lower turnover and shorter trading histories - will likely only be offered factoring facilities. Lenders often prefer factoring, as they are able to directly influence how quickly customers make payments i.e.

In contrast to invoice discounting, invoice factoring sees you handing over your sales ledger to a third party - who then deal with your customers directly. Depending on the relationship you have, funds from sold invoices can be released in a matter of hours - with processes being quicker with online debt factoring companies.

#INVOICE FACTORING COMPANIES FULL#

Invoice factoring companies (factors) do not purchase invoices at full face value - instead they purchase them at a discount. Factoring frees up your time, as a third party team - does the credit control for you. Invoice factoring can also be used by companies that simply want to grow - without worrying about chasing people for payment. By selling your debtor book (invoices) to a factoring house, you can access vital cash - before customers actually pay for your goods and services. Invoice factoring is designed to help businesses with working capital and cash flow problems - particularly businesses that may have long customer payment terms. The key difference is that forfaiting is focused on long-term receivables and capital goods - while factoring is concerned with shorter-term receivables and ordinary goods (and services). It is both a type of invoice finance and a form of alternative business funding.įorfaiting and factoring are similar ways of financing international trade transactions. Invoice factoring is sometimes called “factoring” or “debt factoring”. Essentially, this form of finance is a substitute for more traditional banking loans, credit cards or overdrafts. Money received form invoice factoring can be used for any purpose - like restocking, paying bills or business expansion. Subsequently, the factoring company takes on the responsibility for collecting these payments. Invoice factoring enables companies to sell any unpaid invoices (accounts receivable) to a third party (a factoring company).