What is factoring
Tuesday, August 5th, 2008Factoring means selling your sales invoice to a factor who will then be responsible for collecting payment of the invoice from your client.
You will receive up to 95% of the face value of the invoice immediately and your factoring company will assume full responsibility for the sales ledger.
If your factoring facility is a recourse facility, there is no bad debt provision. If the invoice isn’t paid, your factoring partner can reclaim the balance from you, after a defined period. If the facility is non-recourse in nature, the factoring partner shoulders the bad debt and cannot reclaim payment from you.
Invoice Factoring is one of the fastest ways of resolving cash flow problems or ensuring your business has continuous and adequate working capital.