Using An Invoice Factoring Service: The Benefits And Costs

Benefits Of Invoice Factoring

Making use of an invoice factoring service can improve your bottom line and offer your company a whole range of benefits, such as:

Improves cash flow by immediately, releasing up to 85% of funds against the value of outstanding invoices.
Gives you access to an ongoing supply of cash that grows as your sales grow.
You work with a dedicated team of professionals who will prepare and send out statements, telephone all of your customers, collect payments for you and maintain professional and detailed accounts of your transactions.
Management time is freed to drive the business forward as they are no longer spending time on unpaid accounts and they are no longer held back by insufficient cash flow.
By making use of a factoring facility you can benefit from improved profitability as you can pay suppliers earlier, buy in larger quantities and take advantage of any volume discounts.
It is a very competitive market so there are good deals available.
Knowing exactly when you are going to be paid assists with financial planning.
You may find that some customers respect factors and pay their debts more promptly.
It is possible to protect your firm from bad debts if you decide to choose non-recourse factoring.
You receive cash as soon as orders are invoiced so it can be used for capital investment and to fund future orders.

Costs Of Invoice Factoring

Factoring and invoice discounting services are tailored to your business so the actual fees you pay will depend upon your specific needs.

There are two types of fee:

The first is the interest you pay on the money you use, this tends to be between 1.5% and 3 % over the base rate. This is extremely competitive when compared with other forms of finance, around the same cost or lower than overdraft rates from a bank.
The second is a service fee which can also be called a credit management fee. This amount varies and will mostly depend on your turnover, however the number of customers you have and the volume of your invoices are also taken into consideration. You will find that typical fees for factoring tend to range from 0.75% to 2.5% per cent of your total turnover. For invoice discounting these fees range from 0.2% to 0.5% of turnover, significantly less as only finance is provided.

Small additional charges for credit insurance are also made if non-recourse invoice factoring is used. These will range from 0.5% to 2% of turnover depending on the level of risk the factor assigns the arrangement.

There are many different types of invoice factoring service available in the market which makes it hard for customers to pick the most effective and lowest cost deals. We can put you in touch with the ideal factor for your exact business needs and best of all we do not charge you for our brokering service. Get in touch today on 0845 838 0936 or drop us an email and find out how we can help your business grow.