What if you need to grow your business but your cash is tied up in unpaid invoices?

Discounting & Factoring

August 2005

There are many ways of funding and growing a business ranging from the traditional bank overdrafts to venture capital funding, and market flotation to name the extremes. This is in addition of course to the businesses, or shareholders, own resources.

If you need to grow your business but your cash is tied up in unpaid invoices, or you want a flexible supply of working capital and the time to realise your plans, the solution to this may be in Invoice Discounting or Factoring.

Factoring and Invoice Discounting is a relatively unknown and misunderstood source of funding for small businesses, however for many this can be a lifeline.

It works by giving your business an injection of cash of up to 80% (dependant on circumstances or requirement) of your outstanding invoices. It is a source of funding which grows in line with your sales.

With factoring the lender will prepare and send out your statements, telephone your customers and collect payments for you, they will also maintain professional detailed accounts of your transactions. You will remain in control by working with a team of people who ensure your customers still remain happy with their service.

If you prefer to keep control of your customers then the Invoice Discounting Service will be the alternative for you, where sales invoices and credit notes are forwarded on to your invoice discounter, but you still collect your payments.

This type of facility is not suitable to all types of businesses or situations and is currently an unregulated environment. Care needs to be taken with comparing structures, termination clauses, hidden charges and limit/advance restrictions.

Martin Shearwood of MJS Business Finance comments, “ The UK Factoring and invoice market has become a £132 billion industry with almost 40,000 companies turning to invoice finance as an alternative to traditional funding options. We hope to increase our customers awareness of how this option can best work for them along with others to ensure that businesses grow”.

If you would like to know more about how this and asset finance can help your business please contact Martin on 01902 716832.

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