Is factoring or invoice discounting suitable for my business?

The most suitable candidates for factoring and invoice discounting are growing businesses because the level of funding grows proportionately as turnover increases. However, if you are using traditional loan and overdraft facilities which the bank will not increase, then this type of facility will provide a solution for cash flow.

Although this is a relatively low cost way of increasing your cash flow it would be wise to examine the costs of alternative options before entering into an agreement. Also, debt finance providers tend to prefer firms which receive invoices where it is clear that the goods or services have been delivered and where few payment disputes or credit notes have occurred.

A potentially costly mistake which some companies make when arranging a factoring service is picking the first provider they come across. There are so many providers that simply looking on the internet will probably not get you the best deal.

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You may also find our business finance glossary of terms useful.