Factoring Finance for UK Businesses

admin — Tue, 16 Jun 2009 00:23:44 +0000

A branch of smaller industry specialist or high street bank that a business finance company is providing is called factoring. It is a limited term lending that guarantees the lender that they have the right to ask for revenues from the borrower. Usually in factoring the lender provide the borrower 85% of the invoice value up front. The lender will collect the full amount in invoice including the 85% and their fee and then hand in the balance. Factoring is available in different types depending on the borrower. It may be a trade finance, invoice finance, debtor finance or invoice discounting. One of the main features of factoring is the reliance on the customer’s credit standing and not of your own. Factoring is important for small businesses that depend on customers paying invoices for the working capital. It is best to tied up on these invoices cash flow that is effective. It limits growth and causes problems when paying staff and suppliers. Factoring according to experts is the process of converting invoices into cash as soon as they are issued that allows the money to work where it is needed.

In factoring the first step is to ask for quotes for the services. The services and cost varies depending on what the customer needs. It is very competitively priced as compared with other type of financial business. Factoring service fee covers the day to day services of the purchase ledger, which is usually 0.5% and 3.0% of the turnover. The interest charge and the charged against the amount of each invoice is usually a fixed percent above the factor’s base rate.

Fund Region » Business Finance

Factoring Finance for UK Businesses