Latest figures show that there are between 90 and 100 companies in the UK offering factoring and invoice discounting services.
Factoring is a growth area in the current financial climate – and while the choice of provider has never been greater, finding the right factor for your business has also never been more time consuming and potentially confusing.
Factors usually assume control of your business sales ledger and are also experienced at actually chasing debtors. Because they act between your business and your customers, it is important to find the right factoring company for your business.
Factoring Companies in the UK – Getting Started
There are different types of factoring companies in the UK offering various options:
- Independent factors and invoice discounters
- Brokers
- Factoring companies owned by financial institutions
It is often hard to know when the advice your business is receiving is independent and unbiased – brokers can often promote financial goods to earn commission and UK factoring companies that might appear to be independent or offering unbiased advice might actually be owned by a major high street bank and thus promote its own products, which might not suit your business purposes.
There are also a multitude of comparison websites – and quite often websites that appear to be independent are actually promoting the services of one particular provider or even their own factoring services, which again might not suit your business requirements.
The first steps should be:
- Make a note of your business needs in as much detail as possible, including both domestic and export factoring requirements
- Have a rough idea of the percentage of receivables your business can give over to factoring or invoice discounting – remember you will usually receive between 90%-95% of these, but will also pay a monthly fee of between 0.5%-3%
- If your business is an SME, look for factoring companies with specialist knowledge in this area of business
- Look for a factoring company in your particular region of the UK
- If you are in a specialist area such as construction where renegotiation of invoices or disputes are common, look for factors specialising in your sector..
Comparison websites – Factoring in the UK
It is important to use a comparison website and factoring companies in the UK that can offer advice tailored to your business needs and not a product that they are being paid to promote.
Obtaining preliminary quotes from a number of sources is also useful – but do not be tempted by a cheap deal or one that does not quite fit the bill, but solves a short term issue: look for factoring companies that can offer a plan tailored to your business sector and that affords as much flexibility as possible.
Some other issues to be aware of when obtaining quotes from factoring companies in the UK are:
- Is the website you are using owned by a financial institution rather than being completely independent? (Read the small print)
- Is the company quoting a broker, owned by another financial institution; or is it completely independent and able to tailor a factoring or invoice discounting service to your business needs?
And can the company offer:
- The type of invoice factoring arrangement you would like eg Single Invoice Discounting, Confidential or Disclosed Invoice Discounting, Selective Invoice Discounting, Export Invoice Factoring, Recourse or Non Recourse Invoice Factoring
- Competitive terms
- Flexible Factoring or Invoice Discounting service periods
- A customer service and complaints procedure
- A termination agreement
- Local and sector knowledge of the region in the UK and market your business operate in
And
- Are they a member of The Asset Based Finance Association (ABFA)?
Obtaining quote from factoring companies in the UK without obligation
If you need more help to get started on the process, you can obtain free advice and quotes without obligation within 48 hours by completing the online form at Companeo.
- its network of supplier websites uses agreed factoring companies in the UK who are specialists in SME services – and include Blue Chip companies and financial providers in the UK.
- the company is, however, completely independent, so you will receive quotes and advice tailored to the business information you have supplied, rather than products that are being specifically promoted by factoring and invoice discounting companies.
- Once you have chosen a company to take your cash acceleration plans forward with an assessment of your business, it is also important that you actually get on with the person who will be handling your company’s factoring or invoice discounting service – and that they understand your business and feel like part of the team.
- its agreed suppliers are nationwide in the UK, so there is every chance your business will be able to find a factor or invoice discounter in your region, who understands the market, knows your sector and can arrange the best invoice factoring plan to take your company forward.
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