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Factoring and invoice discounting (also known as debtor finance) is a method of raising funds against an invoice as soon as it is raised rather than waiting the 30/60/90/120 days for the customer to pay.
The factoring facility can dramatically improve your cash flow by releasing money as early in the process as possible after the order has been completed and because invoice finance is linked to sales then the facility is ideal for funding growth by providing immediate working capital.
A key advantage of factoring 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. Typically, within 48 hours of the factoring facility being set up you can borrow up to 85% of the value of your approved invoices. The remaining 15% is paid to you, less a small service fee, once payment is received from your customer.
Once the invoice finance facility is established, the level of advance you receive against invoices depends on a number of issues, but can rise as high as 100%. Once the factoring facility is in place, there is no limit to the amount you can borrow as the level of finance is directly linked to the level of sales. So as your business grows so does the amount of funding available to you. This is in sharp contrast to bank overdrafts, which require regular re-negotiation and arrangement fees.
Invoice Finance facilities can incorporate a range of options which enhance their flexibility including the ability to chase your own debtors should you wish, have a confidential facility such that your customers are unaware of the lenders involvement or provide credit insurance against the failure of any of your customers. At Plutus, we have a first class understanding of this rapidly expanding market and strong relationships with many of the key providers. We will always seek to ensure you are introduced to lenders who are best placed to meet your business' individual needs.
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