Invoice Factoring
Invoice Factoring has been a popular financing tool for a number of years. However, in these tough financial times, more and more businesses are looking to Invoice Factoring as a way of raising quick funds. With many businesses offering as many as 90 days before requiring full payment of an invoice, it’s no wonder that many of them are looking for ways to get that cash a little sooner.
Basically, a company’s invoice is sold to an outside firm at a small discount. The seller generally receives 80 per cent of the invoice on the day of sale, with the remaining 20 per cent being paid when the customer finally pays the invoice. From the final 20 per cent, the factoring company hold back between one and five per cent of the original invoice value.
This discount depends on a variety of factors; one of the most important factors is the number of days outstanding on the invoice. More detailed information on Invoice Factoring can be found on factoring-mechanics.co.uk; one of the UK’s best resources on the subject.
Invoice Factoring offers the seller a number of particular advantages. Many suppliers offer limited-time discounts. In this case, by Invoice Factoring, the seller has spare cash to buy new raw materials at the best price, cancelling out the discount lost to the factoring company.
In addition, less time will be lost to late payments, as firms receive the cash from their invoices early. However, potential factoring customers should note that late payment might lead to a bigger discount required by the factoring company in the future.