What is Factoring in Business

Factoring-in-Business

Cash Flow Advantages From Invoice Factoring

Seventy-nine percent of the more than 4.8 million businesses in the United Kingdom are not aware of the cash flow benefit that is available in their unpaid invoices.

Unpaid Invoices in Business

Unpaid invoices are an asset just like inventory and other sources of collateral for loans and can be used to improve you businesses cash flow or to provide extra cash for expansion or to get a retailer through the short times before yearly events that make a retailer profitable for the year.

The problem is most businesses do not know how to use this asset completely to their advantage. Between 80 and 90 percent of the cash value of an unpaid invoice can be used as an asset to acquire capital if you follow a simple routine.

The process (called factoring) involves your business, your customer, a lender, and an unpaid invoice from your customer.

How Factoring Works

Once you bill your customer, you send a copy of the invoice to your lender. The lender will give you 80 to 90 percent of the value of the invoice and assume the collection details from your customer. Your customer will pay the lender 100 percent of the invoice. You get the 10 or 20 percent of the difference between what the lender initially gave you as a loan on the invoice less charges for the loan and the usual bank fees.

There are differences in the charges that a lender requires depending on whether your business has tangible security or not. Tangible security normally means equipment, cash, stock, and other assets that can be readily converted to cash.

A company without tangible assets will pay a two percent higher rate than a company with tangible assets for an overdraft should your customer invoice go into default due to lack of payment or failure to pay on a timely basis as stipulated in the invoice. The rates charged by an invoice financing facility for factoring are the same (zero) if your company has tangible assets or not.

The advantage to a company without tangible assets is a fourfold increase in their cash flow. Companies with tangible assets can usually expect a twofold increase in cash flow.

Benefits to Your Company

Your company also benefits from reduced overhead involved with the processing of invoices and the variety of mail costs involved in invoice processing. You also benefit by freeing up some of your accountants time for more profitable endeavors.

Touch Financial Support is a premiere expert in arranging cash for unpaid invoice deals between banks and businesses. The company has a totally business friendly approach that includes variable rates and terms that fit your type of business and invoice schedule perfectly, low service rates, special rates, an award winning reputation, and easy to understand contract terms.

Most importantly Touch Financial Support is connected to the top 20 lenders in the United Kingdom so you get the best possible value for your unpaid invoices.

Touch Financial Support does not charge you a fee and a consultation and exploration of this method of cash flow improvement is always free.

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