The service Invoice factoring is more like a B2B correlation which benefits a business to obtain funding to fulfil an urgent requirement. Businesses use invoice factoring to obtain a smoother and instant cash flow from other businesses instead of waiting for the payments to be made by their customers. Invoice factoring in UK is considered an agile and effective financing method. The business looking for invoice factoring sells its products or services to another business to acquire more money than it already has.

Another way of explaining invoice factoring companies in UK is that, businesses which require instant cash sell their invoices, of work they've already done for somebody, to a third-party factoring company. The remaining unpaid invoices are then chased up by the lender to compensate for the money you borrowed from the factoring company/lender.

How does the UK invoice factoring work?

The invoice finance companies in UK provide financing by purchasing all or few of your outstanding invoices. Initially, they advance you up to 90% of the value of the invoices. The remaining amount is repaid when the accounts are settled, they deduct their commission and the interest money before paying you the remaining amount. The advance payment does not have a fixed percentage; it usually depends on the financial standing of the acquirer.

A higher percentage of funds can be achieved if you approach a UK blue-chip company for funding. Once you've attained the funding, the factor takes hold of your sales ledger. They'll are then responsible for providing the clients with account statements and chasing all the outstanding payments. You can also opt for online invoice factoring, which is a more convenient way.

When should you look for invoice factoring for your company?

  • When you have a bulk of pending payment invoices and your overall cash flow is getting affected
  • When you have to cover larger but short-term expenses
  • Repayment of loans

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