Invoice factoring company – All you need to know

This article will endeavor to provide you with all of the factoring information you need to know prior to submitting an application to a factoring company. First you should determine whether factoring receivables is a good option for your business.



Factoring receivables is a way of increasing a businesses cash flow without the need for a bank loan. The costs are higher than a bank loan however the money is extended more quickly and for some businesses this will allow them to grow and increase profit (offsetting the costs involved). So receivables factoring may be a good option if your businesses greatest asset is the total of the unpaid invoices and you have plans to grow and expand. So for example businesses that do not have the funds to place larger orders from suppliers or that have been rejected for a loan from the bank or the business owner would rather not offer up his or her real estate for security for a loan are the kinds of business for which receivables factoring may be appropriate. Once you have determined whether receivables factoring is for you, you should know what to expect in terms of costs and fees associated with any accounts receivable factoring agreement you may enter into. There are usually two fees involved being the service charge or administration fee which usually ranges from 0.5 to 3% of the total of the invoices sold plus the discount charge, which is calculated daily based on the amount of funds drawn from your facility. This amount is comparable to the interest charged for an overdraft facility and can be more. The costs will of course depend on the services that you require from the factoring agents. There are all sorts of bundles of services available, some of which place the risk of a customer not paying its invoice on the factoring company and others placing the risk on the business. Obviously if your business takes on the risk then the costs associated with the accounts receivable factoring should be on the lower end of the scale.

Invoice factoring companies

Any accounts receivable factoring company that places an online factoring advertisement (at least any that I have seen) is quite shy about setting out exactly the costs involved with the factoring services offered. Most accounts receivable factoring companies provide only an outline of the factoring services offered and a range of the costs involved. All of the advertisements that I have seen offer further factoring information upon receipt of your factoring application.

Independent info: Invoice factoring companies

Of course the advertisements described are designed to enable the invoice factoring company to get access to your details so that they can try to sell you their product however it is also because the factoring services offered to each business will be different.



The factoring services offered by factoring companies include credit checking facilities, administration of unpaid invoices including reports to your business, chasing payments and insurance against non-payment of invoices by debtors. Perhaps your business does not require some of these factoring services in which case you would probably expect the fees charged by the invoice factoring company to be on the lower end of the scale. You should, as with any goods or services, do some shopping around with factoring companies and compare factoring services and related costs. You should probably think about which factoring services your business requires well in advance of making an application to a factoring company. The information about factoring and all else on this website in not intended as any form of advice and should not be understood in that way. If assured correctness in information is sought it should be gathered from other sources such as e.g. professional consultants.