Factoring

Factoring is an extremely flexible form of finance, which grows in line with the growth of the business.

Sales invoices are forwarded to the factoring company who will immediately advance up to 85% of the invoice value. The balance of funding, less charges, is received once the customer pays.

In addition, the factoring company manages the sales ledger, issues statements, chases the debts, and collects payments from your customers. Should you require, bad debt protection it is also available.

Factoring can be used to generate funding in a number of situations:

  • Start Up/Phoenix
  • Management Buy Out
  • CVA
  • Business Expansion
  • Corporate Acquisitions

Costs - There are two main costs associated with a factoring facility:

Service charge:

Expressed as a percentage of turnover (generally between 0.5% and 3%), the actual charge will be determined by the workload involved i.e. the number of customers, the number of invoices raised, etc. There will often be a minimum annual charge imposed.

Discount charge:

This is the cost of borrowing money, expressed as a percentage over bank base rate. The rate charged usually varies between 1.5% and 3.5% over base.

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