Invoice factoring provides fast access to cash, improves cash flow, and reduces the burden of waiting for customer payments.
Invoice factoring is a financial solution for businesses that regularly send invoices to their customers. It allows you to get paid upfront for invoices as soon as they’re generated. This saves you from having to endure extended payment terms.
Invoice factoring helps many businesses overcome cash flow challenges, as a funder can provide an advance of up to 90% of the invoice amount. The remaining balance, minus fees, is then settled when the customer pays the invoice.
Factoring is a financing solution that simplifies your cash flow management.
Here’s how it works:
1.
Complete Your Work
You begin by fulfilling your customer’s order, and providing your goods or services.
2.
Raise an invoice
Create and send an invoice to your customer for the products or services completed.
3.
Copy for Funder
Send a copy of the invoice to your chosen funder. They will receive this document for processing.
4.
Verification
Your funder will then verify the invoice with your customer to ensure accuracy and legitimacy.
5.
Funding
6.
Customer Payment
Instead of your customer paying you directly, they will remit the invoice payment to the funder when it’s due. This way, the factoring company takes care of the collection process.
7.
Balance Settlement
After receiving the customer’s payment, the funder will forward the remaining balance to you, deducting any fees for their services.
8.
Credit Management
The funder manages the collection of payments directly from your customers. You won’t need to handle the task of chasing overdue payments.
Invoice factoring is tailored for B2B businesses in the UK. It’s ideal for businesses issuing invoices with 30–90-day payment terms or sometimes longer.
With over 35,000 UK companies benefiting from invoice factoring, it caters to a wide range of business sizes, from small businesses with invoices worth a few hundred pounds to large enterprises dealing with multi-million-pound invoices.
To be eligible, most funders require businesses to have at least 12 months of trading history and a net turnover exceeding £50,000.
This solution assists businesses in diverse sectors, including:
Fast & Flexible
Expertise & Experience
Tailored Solutions
This versatile financing option offers numerous benefits, helping businesses improve their financial stability and streamline their operations.
Here are the key benefits of invoice factoring for businesses:
Improved Cash Flow
Factoring provides an immediate injection of cash by converting outstanding invoices into working capital.
The approval process is typically faster and more straightforward than traditional financing methods.
Businesses don't have to wait for customers to pay their invoices, which can be a source of financial stress.
Invoice factoring is primarily based on the creditworthiness of your customers rather than your credit.
The cost of invoice factoring can vary depending on several factors. Including, the funder, the creditworthiness of your customers, the number of invoices you factor, and the terms of your agreement.
Check out our invoice finance cost calculator for a close estimate of the costs you can expect with invoice factoring.
The confidentiality of your factoring relationship depends on the terms of your agreement. Some factoring companies offer non-notification or confidential factoring, which means your customers may not be aware of the arrangement.
Check out our blog, what is the difference between Invoice Factoring and Invoice Discounting, for more information
No, it’s a sale of your accounts receivable, so there’s no debt involved. You receive immediate cash based on your outstanding invoices.
Yes, you can continue to use factoring even as your business expands. Factoring can be a scalable financial solution that grows with your needs.
“Jonathan from Smart business Finance is always there to offer advice and to point us in the right direction to any questions we have and to tell us of the best deals for finance for our company. We have no problem in saying we as a company would use these people at any time“.
East Coast Logistics Ltd
‘We have dealt with the Team at Smart Business Finance for over 3 years. They introduced me to my finance partner and have since helped to source a credit protection policy for me. Jonathan has gone above and beyond for me through our business transitional period.
Higher Healthcare
“Extremely helpful and friendly; they found the best service that suited my business needs. Always checked in to see that I was happy with the services after. Their dedication to ensuring my satisfaction and the exceptional level of service they provided truly exceeded my expectations.”
Prioritising People
When choosing a factoring company, businesses must decide between independent factoring companies and traditional bank factors. In this blog, we will discuss four reasons why independent factoring companies are the better choice for businesses.
Invoice finance offers a wealth of benefits for businesses, yet it is often faced with scrutiny, due to the misconceptions that cast doubts on its
Both types of facility enable a business to release cash early from funds tied up in both existing and ongoing sales ledger balances. There are,
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Smart Business Finance is an independent business finance broker based in Chesterfield.
