Was is Debt factoring?
Debt factoring is used by many companies to improve cashflow and can be used to reduce administration costs. Companies that suppy these services are called debt factoring comapany's.
Debt factoring offers the fast prepayment against your sales which allows you at a cost the flexibility to increase your working capital and therefore improve the cashflow.
Factoring company's.
These can be independent or subsidiaries of financial institutions or the major banks. Before you start factoring they will need to meet you to evaluate your business and review your financial situation to access your suitability for factoring services.
If it is accepted that your business is suitable and an agreement is put in place, the factor will normaly agree to advance up to 85% of your invoices, with payments made usually within 24 hours.
The cost of factoring and invoice discounting
Debt factoring is a very competitive business and with many suppliers it pays to shop around. You should make your selection not only on cost but quality of service.
The costs of debt factoring arise in two ways, fees interest charges.
The fees charged will be for credit management and administration services and these will be dependent on your turnover and number of customers you have and the quantity of invoices they process.
The interest charges can vary from around 1.5% to 3 per cent over base rate.
Is Debt factoring for your company?
There is no hard and fast rule for this, but the biggest advantage of factoring is the boost to your cashflow. For example if your company was owed £900,000 you may be able to get £750,000 or more in a few days.
If you would like a no obligation quote on
debt factoring services fill in the enquiry form below.
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