Factoring and invoice discounting

Factoring allows businesses to obtain money from invoices issued, rather than having to wait for its customers to pay them, creating a source of finance that assists cashflow and removes the need for an overdraft facility.

Factoring can release as much as 95% of the value of each invoice, with the balance paid on collection, less any fee. Factors make funds available because the lending is based on the credit worthiness of the debtor as opposed to the creditworthiness of the business using the factoring service.

Factoring is particularly useful for those businesses which are expanding and need to fund this growth. The main benefits are that it releases cash, payments are made against business to business invoices, without having to wait weeks or months for payment, it improves cash flow, it saves time by reducing internal invoice ledger management, and factoring limits are usually flexible as the funding grows in line with turnover.