Invoice factoring

Invoice factoring is a finance facility intended to help business owners leverage their unpaid invoices enabling them to improve their cash flow position quickly. A factoring provider enables you to receive most of the invoice cash value immediately, rather than waiting for weeks or months to get paid.

The amount of finance available is typically stated as a percentage of your outstanding sales ledger, but can be restricted by certain terms, such as limiting exposure to a single large customer.

Usually, payments from customers will go into an account controlled by the factoring company, and your customers will be aware that you use invoice factoring. Some invoice factoring providers will present the option to credit insure specific customers, or your entire sales ledger, to minimise your exposure to bad credit.

Benefits of invoice factoring

  • Cash flow management made easier
  • Most factoring providers will also manage credit control
  • Save administration time as you won’t have to chase customers for invoice payments
  • Business receives funds without waiting for customers to pay