Sometimes referred to as Full Service Factoring, this provides the complete answer to slow-paying customers, shortage of working capital and, if needed, protection against bad debt losses. Exporters may like to know that some of our Members have partners in overseas markets and can include export transactions in their service.
A Factor agrees to-
Pay an agreed percentage of approved debts as soon as debts are notified. The percentage depends upon a variety of factors, but 80/85% is common. The balance, less charges, is paid when customers pay. This flexible finance keeps pace with business growth, without parting with control or equity.
Undertake all credit management and collections work, following an agreed credit policy to ensure faster customer payments without loss of goodwill. The savings in administration are substantial, and faster customer payments mean a reduced term of borrowing, resulting in lower interest costs.
Bad Debt Protection-
Some Asset Based Finance Association Members offer the option of including protection against bad debt losses in their factoring service. This safeguards profits, cash flow and the balance sheet.
With Factoring there will normally be a charge for the collections service and, if required, bad debt protection, expressed as a percentage of turnover. Charges are the subject of a formal quotation after the future provider gains an understanding of a business and the workload to be undertaken. It is commonly between 0.75% and 2.5% of turnover.
For the finance provided in advance of collections, there is usually a discount charge calculated on day-to-day usage of funds. It is likely to be comparable with normal secured bank overdraft rates.
Our List of Members shows which companies provide Factoring services.
If you seek debtor finance but wish to retain responsibility for your sales ledger, the Invoice Discounting service will be of interest.