At Corporate Finance Associates, we have a wide knowledge of the players in the market, and know who are specialists in certain industries. Our factoring broker service puts you in direct touch with UK factors and invoice discounters who may be able to assist your business.
Why factoring or invoice discounting?
Factoring (includes credit control) and invoice discounting (you collect your own monies) can dramatically improve your cash flow by releasing money as soon as you have completed an order and raised an invoice rather than having to wait for your customer to pay. This makes them ideal for funding growth. Because it's linked to sales, factoring or invoice discounting is ideal if your business does not have the financial track record or security available to negotiate sufficient overdraft facilities. A key advantage is flexibility. The amount you can borrow grows in line with sales and it is often possible for you to repay bank facilities and release previously pledged security.
How much can I borrow with a factoring facility?
Typically, when factoring/ID is set up you can borrow about 80% of the value of your approved invoices less than 90-120 days old. Thereafter, cash will be made available against invoices on a daily basis with the remaining 20%, less charges, once the value of the invoice has been collected. Once the system is established, the level of advance you receive against invoices depends on a number of issues, but can rise as high as 100%. Once in place, there is no limit to the amount you can borrow as the finance is linked directly to sales. This is in sharp contrast to bank overdrafts, which require regular re-negotiation and arrangement fees.
How much does factoring cost?
The cost of such a facility is normally 2.5% to 4% over base rate for the money borrowed together with a service charge linked to gross turnover of at least 0.5% depending upon the level of annual sales, the number invoices raised and how many live accounts are on the sales ledger. Small additional charges are often made for extra services such as credit insurance.
So do you have to wait a long time for your clients' to pay? " Does this hold up business growth? " Do you need to raise money for deposits on commercial mortgages? " Or do you wish to undertake a MBO etc? Debtor Finance (or factoring/invoice discounting) can dramatically increase your cashflow and allow you to grow your business, rather than working from hand to mouth consistently. It may be the answer for a year or two, so you can get yourself back on your feet, or fund an expansion etc. Call us to discuss for impartial and FREE advice or go to our Contact Us Page to find out how we can help.