Introduction
The financial industry is complicated. It's hard to know which factors will be most effective in your business and what your company needs from its finance team. Factor Finance can help you navigate the complexities of the financial industry and find the right solution for your company.
What is Factoring Finance?
Factoring finance is a form of finance that allows you to get money for your invoices before you have to pay your suppliers. It’s also called invoice discounting, and it’s one of the fastest ways for small businesses to raise cash quickly.
So, how does invoice factoring work? Let’s say you sell products to your customers, and they pay you 30 days after receiving the item. Say you have a $10,000 invoice that is due in 30 days. You can sell this invoice for 70% of its value (minus fees) to a factoring company like Factoring Depot.
How Can Factoring Finance Help Your Business?
You can get the money you need when you need it.
You don't have to wait for a bank loan.
You don't have to pay interest on the factoring finance.
On the other hand, factoring finance is not free. You have to pay a small percentage of the amount you receive for your business. The cost of factoring usually ranges from 1% to 3%.
How Does Factoring Finance Work?
Factoring is a simple process. It can fund short-term cash flow requirements and provide long-term funding. The factoring process includes three steps:
You sell your invoices to a factor that pays you immediately for the invoice value.
The factor keeps hold of the invoice and attempts to collect payment from your customer directly.
If successful in collecting payment from the debtor (your customer), the factor then pays you after deducting an agreed discount rate and any interest charges that may apply.
The factor will also deduct a fee for processing your invoice. You can only sell invoices that are due within 180 days.
A strong cash flow is crucial to a business, and growth can be stifled without access to additional funding.
Cash flow is the lifeblood of your business. It’s the difference between spending and taking in, so a strong cash flow can help your business grow and thrive.
But without access to additional funding, you might not have enough money to pay for overhead expenses like payroll or rent. Without enough cash flowing into your business, it can quickly become a struggle just to keep up with daily operations.
In this section, we’ll explain how factor financing works and why it can be beneficial for businesses that need more capital than their income allows them to borrow from banks or other lenders.
Conclusion
It's an exciting time for factoring finance. Not only do the benefits of factoring appeal to businesses across the UK, but lenders are increasingly able to offer these loans through more flexible channels. To find out more about how Factoring Finance can help your business grow, contact us today!