What is Invoice Factoring?

As a business owner, have you ever encountered challenges due to cash flow? You’re not alone. In fact, 82% of businesses fail due to cash flow related issues, that’s a huge number! This is largely due to the long payment terms business owners face, especially when revenue streams are already limited.

After completing a job, businesses typically must wait on average 31 days to get paid by their customers, this holds the business back, as they might have to pay for more suppliers to take on more jobs, hire more staff for the same reason, or just meet operational costs, but they can’t because of the long payment terms.

This is where invoice factoring comes in, and with it’s increasing rise in popularity, more and more business owners are hearing the term. But what exactly is invoice factoring, and how could it possibly benefit your business? Well, today, we answer that very question.

What is Invoice Factoring?

Put simply, invoice factoring is a type of business funding which allows business owner to get their invoices paid within 24 hours, rather than 31 days. Instead of waiting for your customers to pay, the lender will typically pay you up to 90% of the invoice value within hours of submitting the invoice.

Here’s how it works:

You complete your jobs as normal and issue an invoice when the work is complete.
Send your invoice to the lender, usually done through an easy-to-use online portal.
The lender will then pay you up to 90% of the invoice value, giving you instant cash flow to cover expenses, pay employees, or take on new jobs.
The lender will then collect full payment from your customer when the invoice is due.
Once your customer pays the invoice, the lender will send you the remaining balance, minus a small fee for their service.

Is Invoice Factoring Right for Your Business

So, invoice factoring sounds great, but is it right for your business? And why should you choose it over other financing options?

Well, here’s why it could be the ideal choice for your business:

Instant Cash Flow Boost

The biggest advantage is the instant cash invoice factoring provides. Instead of waiting for your customers to pay, you get the money you need to cover expenses almost immediately.

No More Chasing Payments

Let’s face it – chasing down late payments can be time-consuming and stressful. With invoice factoring, the lender handles the collection process for you. This frees up your time to focus on more revenue driving activities.

Grow Without Stress

Growth requires cash. But taking out loans and credit cards can be difficult, especially if you’re a new-start without a long financial history. Invoice factoring is a debt-free way to fund your growth. You’re essentially getting an advance on the money you’ve already earned, so no worrying about accumulating debt.

Flexible and Scalable

One of the great things about invoice factoring is that it grows with your business. The more invoices you generate, the more funding you can get. Unlike a loan where it’s a fixed amount, invoice factoring grows with your business. Perfect for businesses experiencing growth phases.

How to Get Started

Getting started with invoice factoring is easy! We’re here to help you every step of the way. Simply fill out our online enquiry form or give us a call on 01923 882910 and we’ll help you out every step of the way.

Find out more about how Team Factors can ease your cash flow or we can talk you through your factoring options.