Factoring is a means of improving your cash flow, by providing an immediate injection of cash against the value of your sales ledger.

It is a great and easy way to increase cash flow when looking to support expansion programmes, mergers and acquisitions, fund a new venture, to raise payment for stock, commercial property or plant and machinery or simply provide cash flow fast. Factoring is also a useful financial tool when you are looking at restructuring either your company or your borrowing using the assets of the company to provide additional cash flow.

When you raise an invoice, up to 95% of the value of that invoice can be made available to you within 24 hours. The remaining balance is paid to you once payment is received from your customer. This means your business has access to an ongoing supply of cash linked to your sales. A factoring facility can compliment your existing banking arrangements, unlike a traditional bank overdraft it offers flexibility based on your sales, so as your business grows so does the amount of funding available to you.

In addition to improved cash flow factoring can also save you valuable management time, as the provider undertakes the credit control function. As well as chasing outstanding invoices from your customers they will send out statements, produce overdue letters and take legal action on your behalf. This ensures that you don’t have to operate with unpredictable cash flow waiting for the payments to come in and what’s more you can protect yourself against bad debts.  

You can also monitor all transactions as most providers give you 24-hour internet access to your account allowing you to keep track of payments received and the amount of funding available to you.

If you would prefer to retain the credit control and maintain confidentiality from your customers you may wish to consider Invoice Discounting as an alternative.

The following products can also be used in conjunction with a factoring agreement to give a greater boost to your cash flow:

Bad Debt Protection
Up to 100% Bad Debt Protection – Peace of mind should one of your customers become insolvent as this facility will safeguard against any losses incurred.

Stock Finance
Increase your cash flow by releasing money against your stock.

Asset Finance
Raise additional cash flow by unlocking the value of the assets you already own.

Trade Finance
Importing goods and need to pay up front? Fund your import purchase to combat the impact on your cash flow.

Purchase Order Finance
Helping you fund that important large order from start to finish.

Commercial Mortgage
If you own a property this can be a cost effective way of boasting cash flow long term.  

Factoring - How Much Does It Cost?

The charges fall into two main categories:

1. A Service Charge
Calculated as a percentage of each sales invoice, alternatively in some cases a yearly fixed fee may be negotiated.

2. A Discount Charge
Calculated against funds drawn at a rate often better than a traditional bank overdraft. 

What Next?
If you would like to find out more about the benefits of factoring please click here

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'Factoring explained'