Factoring

Factoring involves selling your receivables or invoices to a financial institution at a small discount. It’s also known as invoice discounting or receivables financing, though the terms may vary slightly in meaning.

Although the industry is largely unknown, it is quite large—factoring over £ billion in turnover last year. Multi-billion-pound corporations have relied on this long-established financial service for years, and it’s now increasingly accessible to small and medium-sized businesses.

Factoring allows many SMEs to take advantage of their largest asset, namely their outstanding invoices, to help obtain financing. Many new and growing companies have trouble obtaining traditional bank financing due to the length of time in business, profitability or financial strength. But by factoring, they are able to raise cash from approved invoices in as little as 24 hours. Other types of financing generally require two years in business and a profit.