New businesses without a trading history who don’t qualify for other sources of lending may find Factoring/Invoice Discounting to be the solution to their funding needs.
Also companies working on tight margins with long credit terms to customers may require quick access to funds on a regular basis.
Companies who operate a cash-based or retail-type business do not usually qualify.
Many factoring companies have online portals to enable their clients to add information from their sales ledger. The invoices are added per client and then once the invoice is processed a percentage of the sales invoice is paid into your account. The process is quick and easy and can encourage you to raise sales invoices in a timely manner.
For companies operating a cash accounting system for VAT, the invoice is classed as paid when it is settled with the factoring company, not when you draw down the cash. Therefore you still retain the benefits of using cash accounting.
Competition between banks means that if you shop around you can get a good deal.
The Asset Based Finance Association (ABFA) is a body which gives a list of the Factors and their conditions. This is a good first port of call. There are comparison websites for factoring which can compare the various lenders. This could also save a lot of time.
You could also speak to your local business forum or Chamber of Commerce as they may have deals for members that would offer even greater savings.