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Cash flow can go from a flood to a trickle, and can cripple a business if not managed carefully. Factoring your sales invoices can give your business a cash flow boost. However, it is obviously limited to a percentage of the value of your sales invoices.
Invoice factoring effectively provides a prepayment against your sales ledger. In essence, you are selling your unpaid invoices to a third party (the factoring company). The ownership of the invoice now passes to the factoring company, who becomes responsible for the credit control i.e. collecting the money from the customer.
Once you are working with a factoring company, all future invoices notify the customer that you are using a factoring company and that all payments should now be made directly to them.
Invoice Discounting is another way of raising cash against sales invoices, and is similar to factoring invoices except the difference being that you remain responsible for collection of the monies. This allows for a certain amount of discretion as your customers do not need to know that you are raising money against your sales invoices.
However, factoring is not always the answer to the problem and if all you need is short term finance rather than a more permanent longer term commitment, then a bridging loan might be worth considering as it may be more suitable for your requirements.
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To find out more about how invoice factoring could work for you, request a call back using the form on this page. There is no obligation, and you will find our friendly operators willing to help you in every way.