Factoring is one of the most popular and most effective ways of easing cash flow worries with businesses across the UK enjoying its many benefits. But there is still a lot of misinformation out there about factoring which means many businesses are unaware just how useful if can be. Here’s 5 things you may not know about factoring:
Factoring Is Not a Loan
One of the main misconceptions is that factoring is a loan as well as one that is somehow more expensive than traditional bank loans. This is completely incorrect because factoring is not a loan in any sense of the term. There is absolutely no lending involved whatsoever in factoring. When a factoring company buys your invoice and pays you money for it, that is it, that is the sale done and dusted, your business owes nothing to anyone. The responsibility for collecting the money owed on that invoice now stands entirely with the factoring company. Therefore, factoring is not a loan, it’s actually a straightforward sales transaction.
It’s Not YOUR Credit Rating That Matters, It’s Your Customers
One of the most common reasons that some small business owners cite about not using factoring as a way of solving their cash flow woes is that they are worried that they do not have the credit worthiness to benefit from it. The irony is, it’s for small businesses who may not have the best credit and startups that factoring can be a fantastic way of improving their cash flow. This is because factoring is based upon the creditworthiness of a business’s customers, rather than the business’s credit score itself. This means that if your business has some very credit worthy customers, factoring is fantastically quick, simple and cost effective method of improving cash flow.
Compared to Lending From A Bank, It’s Seriously Quick
Is invoice factoring quicker than a bank loan? Yes. We all know that thanks to the current economic climate, getting funding from banks can be a long, drawn out affair. With loan decisions being taken on various factors including a company’s operating history and credit scores, it can sometimes take weeks or even longer. Factoring can be done much quicker than this, often within a matter of days if needed.
Factoring Can Save You Serious Amounts of Time
If you factor your sales invoices then effectively the factoring company is running your sales ledger. Think about the resources and time that your business currently takes issuing and cashing up invoices? There may be a charge for factoring but when you factor in the time saved and the resources saved (which can be deployed elsewhere) then you will often find that their is a net saving by using factoring for your business.
More Businesses Than You Think Use Factoring
You’d be surprised at just how many businesses use invoice factoring as currently over 44,000 UK companies are using either factoring or invoice discounting to fund their working capital.
Chances are that are many of your customers, clients and competitors are benefiting from invoice finance so why not contact Factoring Solutions today on 01827 707680 to find out how factoring can benefit your business happy in the knowledge that all of our services and advice are, and always will be, completely free of charge.