What Types of Factoring are there?

There are various different types of Invoice Factoring to suit your individual businesses needs. These are listed below;

  • Recourse Factoring
  • Non Recourse Factoring
  • Confidential Factoring
  • Exporting Factoring
  • Agency Factoring

What is Recourse Factoring?

  • The factoring company advances funds against Invoices and manages the sales ledger, issues statements, chases the debts and collects payments from your customers.

What is Non Recourse Factoring?

  • Same as above but with the added advantage of bad debt protection. You can cover all of your customers or be selective, the choice is yours. Normally 100% cover is provided subject to a first loss of £1,000.

What is Confidential Factoring?

  • Recognising that factoring still has negative connotations for some businesses most factors are now prepared to offer a confidential service.
  • You will still receive up to 90% cash against invoices plus sales ledger administration and debt collection but the statements and any calls will be made in your name, not the factors. Your customers will not be aware of the factors involvement. This is a very popular type of Invoice Factoring. 

What is Export Factoring?

  • There are a number of factoring companies who specialise in this area.
  • They have in-house multi-lingual teams and a worldwide network of associated companies enabling them to offer a complete export service. This saves valuable management time in dealing with different time zones, cultures and legal systems enabling you to avoid unnecessary obstacles and keep overseas transactions moving quickly.
  • All you have to do is send copies of your Sales Invoices and Credit Notes to the Factor by post or electronically. An initial advance of 90% is made, with the balance on receipt of payment from your customer. The factor collects payments, prepares and sends out statements and keeps detailed accounts of all transactions.
  • Export factors usually insist on all debts being insured, which will add ½% to the service charge. Expect to pay 1% to 2% of turnover and interest charges of 2% to 3½% over base.

What is Agency Factoring?

  • Factoring companies understand that many clients are perfectly capable of running their own Sales Ledger. Allowing clients to be responsible for collecting their own debts reduces the costs of factoring significantly whilst retaining all the financial benefits of immediate cash against invoices.

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