HomeFWJ TakeawayHow do factoring companies work?

Invoice factoring companies work by providing finance to business as a result of assigning (legally transferring) present and future invoices from that business to the finance company under the terms of an invoice finance agreement.

Invoice finance is a form of finance which gives immediate cashflow benefits to a business. Rather than having to wait say 70 days to get paid on average for invoices, it gets an immediate prepayment made against the invoices by the bank pursuant to the terms of a finance facility.

Factoring companies work in a fairly similar format.

  • they will have a sales team looking for new business.
  • new business will then be signed up and part of that signing up take on process will involve the factoring company
    • reviewing the quality of the sales ledger,
    • verifying that ledger,
    • agreeing the terms of the finance facility including what interest (or discount) is charged,
    • what service fees are charged,
    • the type of facility to be used (e.g. factoring, confidential factoring etc.),
    • notifying customers if appropriate of the assignment
  • handling the sales ledger / collection process if required.
  • And of course providing finance to the business.

Invoice finance is a very successful form of finance used throughout the United Kingdom and abroad.

Francis Wilks & Jones is the leading invoice finance firm of experts. Our team has combined experience of many years acting in invoice financing related matters and across a broad range of areas. Whatever your invoice finance related question please contact us now and we can help you.

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