Invoice factoring is a method businesses can use to ensure that money is received quickly once they have completed work for their commercial customers. It is essentially a way of raising funds to help maintain or improve cash flow levels.
Sometimes, although various transactions might have been completed, it might take some time for an invoice to be settled after it is raised. The business will not, therefore, immediately have the funds from these transactions to settle their own expenses or to invest in future business. This can be a common difficulty for businesses, when debtors do not pay in a timely manner.
To help overcome such problems, invoice factoring services are available, which means that the invoice is passed to a third party that will immediately release a fixed percentage of the funds owed, as a loan to the business. In due course, the full payment will be collected from the customer on behalf of the business.
Once the lender, or factor receives the funds, they will then pay the outstanding balance of the invoice to the business, less their charges. This means the business will receive slightly less money overall, but have use of it for a longer period of time. This can be a great advantage to a business struggling with cash flow, either on an ongoing basis or as a short-term solution.
There are various different factoring companies available, with Touch Financial being the UK’s largest invoice finance broker offering access to a wide range of financing options.
The post What Is Invoice Factoring? appeared first on National Society.