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FACTORING
- Cashflow Finance
What
is factoring?
How
does factoring help my business?
Will
my business qualify?
What
are the costs?
Are
different types of factoring available?
What
is factoring?
The
financier provides a cash draw down facility against the value of
the debtors ledger in your business. Up to 80%-90% of the value
of outstanding invoices is made available as a cash injection, usually
within 24 hours of the financier receiving details of the invoices.
Real estate security is generally not required. The remaining invoice
balance is promptly paid once the customer has remitted payment
for the invoice. As the sales of your business grow, the cashflow
finance facility automatically increases, providing the business
with cash to meet increasing financial demands. The financier may
also provide a professional customer administration service which
actively manages the collection of your customers payments on your
behalf.
How
does factoring help my business?
Cashflow finance provides immediate funds for business growth and
allows your management to concentrate on the core activities of
running the business. By improving your cashflow you maintain control
over your business and can enjoy:
Reduction in administration overheads
Increased sales supplier discounts
Increased
profits
Bigger orders by offering affordable credit terms
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Will
my business qualify?
Factoring is suitable for most businesses where goods/services are
provided on account terms to other business customers. Businesses
involved in wholesaling, manufacturing, distribution or service
providers will generally easily qualify for factoring. However,
invoices relating to consumer sales or progress claims for contract
work are not usually suitable for this type of finance.
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What
are the costs?
There
are two main costs: Discount Charge - Calculated daily on the actual
amount of funds drawn from your facility (very similar to interest
rate under an overdraft). Administration Fee - calculated against
the value of invoices provided to the financier. This will usually
be in the range of 0.5%-3.0% (depending on the size and type of
transaction). The administration fee is your outsourcing cost for
having your debtor administration tasks handled in a professional
and time-efficient manner.
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Are
different types of factoring available?
Yes,
there are three main options available: 1. Full Service The financier
provides a full credit management and collection service. Your sales
ledger administration is completely outsourced. This facility is
ideal for companies seeking a streamlined Head Office environment
and allows your resources to be fully concentrated on increasing
sales/production activities. 2. Co-operation Service A full credit
management service is available but you actively assist with the
follow up of invoice collections. This facility is preferred by
companies who require a regular opportunity to maintain direct contact
with their most recent customers. 3. Confidential Service Some companies
already have experienced in-house debtor administration, which they
wish to fully utilise without any assistance. This service allows
the client to obtain cash advances against unpaid invoices, but
the customers are unaware of the financier's involvement.
For
more information contact us
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