Invoice Factoring FAQs – All You Need to Know

Here at Simply Factoring Brokers we get all kinds of questions about factoring! It can seem a bit of a minefield if you haven’t used invoice factoring before, so here we look at some of the most frequently asked questions and give you the low down on what it all means!

1. What is invoice factoring?

Invoice factoring is a type of finance that boosts a business’ cashflow and allows day-to-day bills and expenses to be met without waiting for a big invoice to be paid. When a business receives an invoice, it can outsource the debt to a factoring lender and receive between 80-90% of the money owed within 24 hours. The factoring firm then follows up the debt and hands the remainder, minus a small fee, to the business when it’s paid.

2. Are all factoring companies the same?

No. Factoring firms have all kinds of experience and expertise and some specialise in particular industries, meaning that one invoice factoring firm might understand the nature of your work better than another.

3. Why use a factoring broker?

See the answer to the last question! Factoring firms are not all the same and contacting them independently might mean you end up using a service that’s not right for your business. A factoring broker like Simply Factoring Brokers will listen carefully to your needs and make sure you get a tailor-made solution as a result!

4. What is a factoring service charge?

A service charge is the amount the factoring firm deducts from the overall invoice for the service it provides. The fee is usually between 0.75% and 2.5%, depending on whether the business continues to manage its own sales ledger and credit control or not. Remember to get the service charge in writing (or on email) upfront, as well as any other terms and conditions.

5. Will my customers mind that I use a factoring service?

Many customers won’t mind at all, recognising that invoice factoring is a mutually beneficial way of making sure invoices get paid and cashflow isn’t held up. But we offer completely confidential services, meaning that customers who might not like to think that a third party is involved won’t even know!

6. What is short term factoring?

Short term factoring quite simply allows you to factor your invoices on a temporary basis, such as six months. Short term factoring suits businesses that usually receive payments regularly and on time but, for example, might be expanding or working with a new client whose credit rating is unproven.

7. What kinds of industries use factoring?

Many of our clients are from the haulage, construction, manufacturing and services sectors. However, factoring suits the majority of industries, so don’t be afraid to get in touch if your work is a little out of the ordinary!

8. I only have a small business – can I use factoring?

Yes! Some factoring firms and factoring brokers only work with large companies with big turnovers, but not all do! Simply Factoring Brokers specialises in working with SMEs, and we’re always happy to hear from start-ups and one-man businesses.

9. Is being approved for invoice factoring a lengthy process?

Finding out whether your business can benefit from factoring is surprisingly quick. We will have a chat with you to find out all about your business, and then let you know within about five minutes whether or not we can help. Once we’ve found you the right deal, the money usually reaches you within 24 hours.

10. Who provides the factoring service?

A number of financial providers offer factoring services, including banks and independent factoring firms. At Simply Factoring Brokers we have great expertise in matching our clients to the best factoring provider for them.

Find out more about our services and how factoring could help your company by calling our friendly team on 0333 772 1558.

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