The Benefits And Costs Of Using A Factoring Service
Benefits Of Factoring
 When you make use of a factoring service it can improve your profits and provide your company a wide range of benefits.
These benefits include:
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Fast access to a continuing cash supply that grows in line with your sales.
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You have an experienced team of professionals that will send statements out, call your customers, take care of payment collection and provide quality, detailed accounts covering all transactions.
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An improvement to cash flow immediately by releasing up to 85% of funds against the value of outstanding invoices.
- Using a factoring facility can help you benefit from an increase in profitability because you are able to pay your suppliers earlier and buy in bulk quantities to make use of high volume discounts.
- Management time is freed up to concentrate on driving the business forward. They are no longer wasting time on unpaid accounts or being held back by an insufficient cash flow.
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If you know exactly when you are going to be paid it helps with financial planning.
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Some customers show greater respect to factors and pay their debts faster.
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You can protect your company from bad debts if you choose non-recourse factoring.
- Cash is received as soon as orders are invoiced, this means it can be used for capital investment and funding future orders.
- The market is very competitive so it is possible to get really good deals.
Costs Of Factoring
When you use factoring and invoice discounting services they are adjusted to suit your business so the actual fees you pay will vary depending on your specific needs.
There are two types of fee:
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The interest you pay on the money you use which tends to range from 1.5% to 3 % over the base rate. This is very competitive when you compare it with other forms of finance, about the same cost or less than overdraft rates from a bank.
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A service fee which can also be referred to as a credit management fee. The size of this fee varies and will mostly depend on your turnover. The number of customers you have and the volume of your invoices will also be taken into consideration. The typical fees for factoring range from 0.75% to 2.5% of total turnover. With invoice discounting these fees range from 0.2% to 0.5% of turnover, significantly lower because only finance is provided.
A small additional charge for credit insurance is also made if non-recourse factoring is arranged. This will range from 0.5% to 2% of turnover and depends on the level of risk the factor assigns the deal.
There is a wide variety of factoring services currently available in the market, this can make it difficult for companies to find the most effective and lowest cost deals. We can put you in touch with the most suitable factor for your exact business requirements and we do not charge you for our brokering service. Contact us today and find out how we can help your business grow.
IMPORTANT NOTE: We do not provide any financial advice of any nature and we only operate as introducers (not as brokers) to regulated companies and only for amounts in excess of £25,000.
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