Invoice factoring is the complete answer to slow paying customers, shortage of working
capital and, if needed, protection against bad debt losses.
- You despatch goods / provide services to your customers
- You raise invoices and send to your customers in the normal way,
but also forward
copies to the factoring company
- You receive up to 90% of the invoice values from the factoring
company in 24 hours
- The factoring company will handle sales ledger, chase the debts by telephone and letter,
and will send monthly statements to every customer
- You will receive the balance of the invoice values (less charges) when
the customer settles the invoice
You could also opt for credit protection against bad
debts (for which an additional charge will be levied).
The first is the interest you pay on the money you use (also known as
the discount rate), this tends
to be between 1.5% and 3 % over the base rate. This is extremely
competitive when compared with other forms of finance, around the
same cost or lower than overdraft rates from a bank.
Credit protection, where available, will usually add a further 0.5%
onto the cost.
The second is a service fee. This amount varies and will mostly depend on your
turnover, however the number of customers you have and the volume of
your invoices are also taken into consideration. You will find that
typical fees for factoring tend to range from 0.75% to 2.5% per cent
of your total turnover. The service fee is charged monthly.