A Factoring Company Could Provide Working Capital Businesses Need

With traditional lenders like high street banks and Building Societies clamping down on loaning money during this current recessionary time, how is a business going to solve a possible cash flow problem? The practice of Invoice factoring is becoming a growing option as a way to keep companies growing during these rough economic times. Factoring is often miss understood, and no we are not discussing mathematics, but invoice factoring is an answer to a serious financial problem called cash flow.

Many Companies throughout the world use invoice factoring. Factoring is a financing option whereby a business sells its Business-to-Business accounts receivable or customer invoices at a discount to receive immediate cash.

If you imagine the scenario; Company A owes Company B £100 for widgets it has taken delivery of. Company A is happy with the widgets and will of course pay, however, as an enticement to win the order Company B offered Company A, 45 days credit (good commercial practice to win business). So Company B has sold the widget to Company A, but as yet has not been paid for them. However, if Company B pays, he’s trade suppliers early he receives a big discount. So the answer resolve this could be to use the invoice raised as an instrument to leverage money against in the short term, thus speeding up the cash flow and working capital to the business.

There is no doubt that with factoring services, a business can get money faster - usually within days of raising the invoice and with more flexibility than traditional financing especially as invoice factoring tracks your sales growth.

Debt Factoring is a well established form of financing that has helped businesses grow rapidly and sometimes avoid bankruptcy because of cash flow problems or slow paying customers. Debt Factoring can also be used in helping a business turnaround its fortunes and clear debts. It can used to free up capital to help repay VAT, PAYE or TAX arrears with Her Majesties Revenue and Customs (HMRC) so if a winding up petition has landed on your desk factoring could be used to clear the debt.

The factoring company can also provide credit insurance, full credit control, collections and other administrative services to help small businesses grow without having to hire additional personnel. To see if invoice factoring is right for your business please contact Enable Finance the factoring company on the links provided.