FIRSTfactor
FINANCE
0845 643 4611
Working Capital Specialists

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15 MOST FREQUENTLY ASKED FACTORING QUESTIONS

  • What is Factoring?

    It is an arrangement between a Factoring Company and a business whereby the Factoring Company provides typically up to 95% cash available against the unpaid invoices of a business. A Factoring Company also relieves the burden of routine tasks such as sales ledger management, credit control and credit checking.

  • How can Factoring help my business?

    Factoring can create immediate extra working capital, by advancing cash either the same or the following day against invoices. Factoring also allows the client to concentrate on sales and production functions as the Factoring Company takes care of the credit control process.

  • Why would I need Factoring?

    If your business has inappropriate or inadequate financial facilities, a rapidly growing order book or suffers from late payment from debtors, Factoring could meet your cashflow requirements.

  • What is the difference between Invoice Discounting and Factoring?

    Both facilities provide immediate cash against invoices. Invoice discounting is generally a confidential facility where the client continues to run its own sales ledger. An Invoice Finance facility provides a full sales ledger and credit control service.

  • What is the difference between recourse and non-recourse Factoring?

    Factoring clients can protect themselves against bad debts with a non-recourse Factoring arrangement. The Factoring Company will cover the client for bad debt losses up to an agreed limit for each customer. With recourse Factoring any bad debt is the responsibility of the client. Naturally there is an additional cost to the client for non-recourse Factoring.

  • Are any types of businesses unsuitable for Factoring?

    Yes. Factoring can be used for a wide range of businesses offering goods or services on credit terms. However, some types of businesses such as those involved in stage payments or long-term contracts, as in the building industry, are sometimes unsuitable for Factoring.

  • What criteria must my business satisfy to be funded by A Factoring Company?

    Factoring companies will require a minimum turnover but there is usually no upper limit. Start up businesses will be considered for Factoring if they have a satisfactory business plan.

  • What security is required for Factoring?

    Generally an Factoring agreement between the client and the Factoring Company covering purchase of debts by the Factoring Company, possibly in addition to personal guarantees/performance warranties is all that will be required. Occasionally a debenture over book debts or guarantees from associate/parent companies will be necessary.

  • Can I retain my Banking facilities?

    Yes. Factoring may not disturb an existing Banking relationship. However, it is likely that any existing overdraft facility will be reduced on the commencement of a Factoring relationship but the reduction will be more than compensated by the additional cash made available against invoices by the Factoring Company.

  • What about the relationship I have with my customers?

    While the Factoring company will be in direct contact with your customers, they may welcome your continued involvement in the collection process. In addition, a Factoring financing facility enables the client to enter into additional sales contracts with far more confidence.

  • How can I keep up to date with daily changes on my sales ledger?

    Daily transactions are advised on paper and some Factoring Companies provide a direct computer link between the Confidential Invoice Discounting company and the client who can view their own sales ledger movements as they happen. Any disputes are also notified to clients immediately.

  • Can you Factor exports?

    Yes. The Factoring company can collect your export debt whether they are invoiced in sterling or local currency. Most Factoring Companies, often use Factoring Companies in the country of import, they have the ability to collect the debt in the local language of the debtor and understand the collection process and legal system for collecting debts. An additional charge is normally applicable on export debts.

  • What benefits will Factoring provide for the future prosperity of my business?

    It provides immediate working capital, helps to solve cashflow problems, provides headroom for growth and frees up valuable management time to enable a business to maximise its full potential and enhances ownership value.

  • Are there many providers of Factoring services?

    Yes. Well over 80.

  • How do I choose the right Factoring Facility?

    Our service is FREE of charge.We can help you.