Factoring for SME business finance
Factoring is a very common form of finance for a huge range of businesses across the world. In most cases factoring provides the business a method to ensure cash flow by selling accounts receivable (invoices) to a finance company, who in turn provides capital to the value of the invoice minus a fee (usually a percentage of the invoice). This facility is provided on as many invoices as the business can deliver the finance company, but usually at a level above £4,000 per month as a minimum.
Factors (finance companies) are geared towards ensuring that the businesses customer's have the ability to pay the invoice, so the focus is not as much on the businesses ability to pay (as with a loan with a bank), but rather the customers ability to pay for goods or services which the invoice has been raised against.
In this way Factoring is not the usual business lending facility, like a bank loan or business overdraft, as they amount is not a liability against the business itself. The factoring company has the responsibility to ensure that the invoice is paid but in most cases they have procedures in place to ensure timely payment and invoice management.
Factors (finance companies) are geared towards ensuring that the businesses customer's have the ability to pay the invoice, so the focus is not as much on the businesses ability to pay (as with a loan with a bank), but rather the customers ability to pay for goods or services which the invoice has been raised against.
In this way Factoring is not the usual business lending facility, like a bank loan or business overdraft, as they amount is not a liability against the business itself. The factoring company has the responsibility to ensure that the invoice is paid but in most cases they have procedures in place to ensure timely payment and invoice management.
In addition to this, with the recent economic downturn, it has been increasingly difficult for businesses to secure credit facilities from traditional lenders. Particularly those at the SME and start-up level, even with a solid revenue stream, it can prove difficult to secure lending that will deliver the right environment for growth.
Most SME businesses that make best use of factoring are those at the growth stages where cash flow and a focus on sales and customer service (rather than invoicing and sales ledger management) is the main focus, as this is where a factoring company can deliver a business reliability, with a steady flow of capital, and deliver often much needed assistance with invoice management and credits checks etc. So in comparison to a loan from a bank (which may be a lower cost alternative in some respects), the ability for the business to qualify for a facility may not be the only difference in whether the solutions that factoring provide are ultimately more advantageous.
There are now a huge range of factoring business as seen in our market place review, so it is often of interest to the business to seek out advice from a 3rd party who can share insights on the various factoring solutions and this is exactly what the team behind FindmeaFactor.com can offer. Get in touch today for an introductory discussion with our team.
Most SME businesses that make best use of factoring are those at the growth stages where cash flow and a focus on sales and customer service (rather than invoicing and sales ledger management) is the main focus, as this is where a factoring company can deliver a business reliability, with a steady flow of capital, and deliver often much needed assistance with invoice management and credits checks etc. So in comparison to a loan from a bank (which may be a lower cost alternative in some respects), the ability for the business to qualify for a facility may not be the only difference in whether the solutions that factoring provide are ultimately more advantageous.
There are now a huge range of factoring business as seen in our market place review, so it is often of interest to the business to seek out advice from a 3rd party who can share insights on the various factoring solutions and this is exactly what the team behind FindmeaFactor.com can offer. Get in touch today for an introductory discussion with our team.
