Businesses that have to wait on their clients to send in payment for an invoice can struggle to remain open and operational. In business one needs a steady cash flow to keep open, as well as to grow the company. For those who are struggling there are a couple of answers out there. Businesses can get the cash they need even with slow paying clients to help them get around the post recession difficulties they suffer.
The answer is to find a way to obtain money by converting what a company does have into cash. Invoice factoring is one way to make certain this happens. In this scenario a company seeks a third party willing to buy business assets or accounts receivable. The third party in effect takes over the invoice and makes an 80 per cent or lower payment to the company selling the invoice. The client is then responsible for paying the third party rather than the original party.
FIG is one company in the UK offering such a service. They have designed products to help in a simple format. Their steps are as simple as one, two three when using the Invoice Finance Switching Service.
FIG provides more than factoring. They also have invoice discounting which should not be confused with factoring. In discounting the originating company still holds on to the accounts receivable and the client does not know there is a third party involved. A place like FIG will give up to 80 per cent of the invoice along with charging a fee. Some companies charge interest. When the client finally pays the invoice the company will make a payment to FIG.
Since there is often more than one invoice in the discounting logs whenever money comes into the company it is used to help pay a portion of the “loan” off to help lessen the debts one has. Depending on your company situation you may find factoring is more beneficial than discounting. You should note that both options do have fees associated with the process. You will never get 100 per cent on the loaned money either because it would be too risky for the factoring/ discounting company.
Factoring takes on more of a risk, which means you tend to obtain a lesser amount for a factored invoice over discounting. It is important to shop around because there are more companies than FIG offering similar options and their fees may or may not be better.
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