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JKB Invoice Finance Brokers Ltd
2nd Floor
71 Tabors Avenue
Chelmsford
Essex
CM2 7EL
 

Factoring

What is factoring?

Factoring is a flexible form of finance, which advances money to a company as and when it issues new invoices. Factoring can bridge the gap between raising an invoice and getting that invoice paid. Factoring provides the cash flow necessary for working capital and growth.

There are two major advantages of invoice factoring over overdrafts or other forms of personal or business loans. These are:
  • Factoring is flexible in that the amount you can borrow grows directly with your sales. This is essential to enable companies to fund their growth, since you must usually pay your suppliers before you receive payments from your customers.
  • No other assets are needed to secure this funding.

How does factoring work?

When you send out your invoice, you also send the factor a copy of the gross invoice amount. They will then advance funds of up to 95% of your outstanding sales invoices - normally within 24 hours. Some degree of credit management (credit control) can also be built into the facility.

Factoring is different to invoice discounting as a factor will build and manage a sales ledger.

The best way to explain this is if a client submitted 100 invoices representing a week’s work for ten debtors, the factor would need to set up each debtor account and input each invoice to the correct account. A credit control service is then provided and the cash is collected. The cash is then allocated to the correct debtor account.

Using the same scenario, but with an invoice discounting facility, the same 100 invoices would still be submitted but the batch of invoices would be input onto a single control account. When debtors pay, the cash is bulked together and posted to the ledger as one day's collections.
  • Retain your own collections
  • Credit control service
  • Confidential factoring
  • Construction factoring
  • Recruitment factoring (inclusive of payroll)

Click here to find out how factoring is charged.

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