Invoice Factoring – The Common Misconception

As most of you will be aware reading this Blog factoring is a product that releases cashflow tied up in your unpaid invoices. That’s why there is still the misconception that factoring is only used by companies in a difficult position. Invoice factoring is a cashflow solution, but it’s also away of protecting against bad payers.

The Changing View of Invoice Factoring

The general interpretation has moved on from the 80’s when a factoring facility was only offered to businesses looking for a last resort, today this product is becoming more of a mainstream funding facility and by allot of the mainstream banks being pushed on customers to replace their overdrafts. Clearly Invoice Finance is becoming a more popular option with the modern business and we think it’s important to break some peoples understanding of how this product can be used and what types of businesses would need to use a facility like this.

The short answer to the above question is invoice factoring is used by companies of all sizes, from industry leading firms making billions to new start businesses with a small too modest turnover. As a brokerage we have placed hundreds of clients in various industries ranging from multimillion turnover businesses to new start companies with an uncertain future.

Invoice Factoring for Growth

Every customer we have ever done a deal for has had something in common, they have just won a new contract and need to take on more staff/ move to a bigger premises/ need help with their VAT quarter/ need a funding line to get some O licences. As you can see there are a variety reasons why a business would need some sort of Invoice Financing product, but most reasons have something to do with expansion plans as that is exactly what these types of facilities are designed for, to help companies grow and ease the burden of cashflow which can often restrict a company’s growth because your money maybe tied into an existing contract. This means you can’t take on any new work because new work means more staff, or you can’t take on a new contract as you are waiting for your product to be delivered and your money is tied up with your supplier. You then can’t bring in anymore stock until you get paid against some of your outstanding invoices.

I hope the above has given you a glimpse into how factoring can help a business and more often than not is apart of a company’s long term plans for expansion. If you are a business of any kind that may need some advice on how Invoice Finance can help, then please don’t hesitate to get in touch.