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Five questions you may have asked about factoring

I have listed a few brief answers to some questions that we are often asked about the choice to use factoring.  I hope you will find them informative.

Factoring is used as a source of funding by many successful companies. While, in the past, it might have been thought of as the last option for a struggling company, things have fundamentally changed.  In fact the flexible nature of the funding provided by factoring lends itself to companies experiencing major growth as well as ones where slow payment from customers is causing problems.
The reality is that factoring is widely used and so your starting to use factoring is unlikely even to be commented on.

A customer’s insolvency and the consequent bad debt is, unfortunately, an ever-present concern.  It makes sense to guard against this situation.  Protection against this risk can be included in the factoring package so neither your company’s profitability or funding is affected by the bad debt.

 

Why is only a percentage of the invoice’s value advanced?

Whilst, ultimately, you will be paid the full amount of the invoice less the factoring fee, factors initially only pay a percentage of the invoice usually between 70% and 90%.
However, the factor will take into account that there may be issues where a customer will pay less than the full invoice amount and a credit is required to be issued. The factor will consider your company’s history of such “dilution” of the debts and calculate an advance rate based on this experience.

Also, the overall credit worthiness of your customers will be taken into account when determining the level of the initial advance.

 

I don’t have a very good credit history, will that mean I won’t be able to use factoring?

Whilst your company’s credit history will be considered, the main consideration is given to the creditworthiness of your customers.  This can make factoring a particularly useful source of funding for newer companies which haven’t had time to build up a track record.

This will vary depending on circumstances.  In fact, the determining factor is often how quickly you can provide the information requested! However, if there is an urgent need, funding can often be arranged within two weeks.

These are a few questions that we have been asked about factoring. If you have any others, please feel free to contact me on 07801 858737.

The advice will cost you nothing and can help you avoid expensive mistakes in the long terms.

Why not call us for a no-charge, no-obligation chat about the options that are available and how these can help your business progress?

Contact

Ian Jones (Head of Business Development) on 0161 438 8555 or 07801 858737, or

Stephen Devonport (Business Development Manager) on 0161 438 8555

OR

email us at enquiries@factoringandinvoicediscounting.co.uk


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