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The Process of Factoring and Invoice Discounting
- Once you have chosen the option of factoring you send a copy of all your invoices to your lender.
- After receiving these, the lenders credit control department will release around up to 85 per cent of your outstanding invoices.
- The lenders credit control team will chase your invoices and collect your payments, freeing up your time to run your business.
- Unlike invoice factoring, you raise your invoices and send them to your customer and maintain your own sales ledger.
- You provide a copy of your invoices to your lender and they will advance up to 85% of the value.
- When your Accounts Department receives the payment from your customer, it is paid into a trust account. The lender will transfer the balance to you after deducting the amount of the advance and their fees.
- By managing your own credit control, your customer is unaware that you are using an invoice discounting facility.
Invoice factoring and invoice discounting are becoming a more important source of finance with UK business owners. Using such facilities can release funds based on the value of your outstanding invoices, typically up to 85% and often within 24 hours.
Simple steps to improve your cashflow
Which businesses are suitable for invoice financing?
Almost every business can take advantage of invoice funding including new businesses and start-ups. Most of the funding decisions are based upon the current strength of the sales ledger.
Start-up firms or new businesses would initially choose the option of factoring to immediately boost their cash flow, and as they become more established may wish to switch over to invoice discounting.
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"All About Savings have provided our business with a new invoice factoring system that has dramatically improved our cash-flow position and flexibility with our clients..."