Understanding invoice factoring
Accessing the value tied up in unpaid invoices and letting the factoring company take responsibility of recovering payments.
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Pages in this SectionWhat is invoice factoring?
Invoice factoring, also known as debt factoring, involves selling your outstanding invoices to a factoring company, allowing you to receive a significant portion of the invoice value upfront.
How does invoice factoring work?
- Invoice creation: Deliver goods or services and issue invoices as usual.
- Factoring agreement: Sell these invoices to Novuna, which verifies their validity.
- Immediate payment: Receive up to 90% of the invoice amount upfront.
- Customer payment: Novuna handles the collection directly from your customers.
- Balance receipt: Once payment is collected, receive the remaining balance minus our fee.
What is the role of the factoring company?
A factoring company buys overdue invoices from companies dealing with slow-paying clients and seeking to improve their cash flow. This process enables a business to immediately tap into cash flow upon sending out an invoice, rather than enduring the typical 30-90 day wait for customer payment.
Choosing Novuna as your factoring company also offers the added benefit of credit protection, safeguarding businesses against the risk of customers failing to settle their invoice payments. This level of security is invaluable in invoice finance transactions, offering peace of mind alongside immediate financial relief.
Invoice Factoring FAQs
What are the other types of invoice factoring?
The needs of SMEs tend to vary according to growth stage and industry. To help you work out which type of factoring will suit your business, here is a brief guide to our five options:
What are the advantages and disadvantages of invoice factoring?
Advantages of invoice factoring:
- Benefit from improved cash flow
- Enjoy better working capital, which means more money for growth projects, staff training or stock purchases
- Be able to move away from more restrictive forms of finance, like small business cash flow loans or overdrafts
- Benefit from your chosen finance provider’s in-house credit control processes
- Be able to focus on running your business, instead of chasing late payments
Disadvantages of invoice factoring:
- Your clients will be informed that you’re using an invoice factoring service, and your factor will contact them to collect on factored invoices
- You will be putting your trust in your invoice factoring provider to handle credit control and communications with your customers
- Potentially some customers may not understand invoice factoring and will wonder why the company has decided to use it
Is your business eligible for invoice factoring?
Is your annual turnover £50,000+?
Generally speaking, invoice factoring facilities are best suited to companies that sell to other businesses on credit terms, and turnover more than £50,000 a year.
Do you have high up front costs?
Industries that experience high production costs, periods of negative cash flow during seasonal sales slow downs, slow paying clients, experience unexpected growth and other unpredictable costs affecting their day to day operating cash flow use factoring as a non debt solution to their cash flow problems.
Are you experiencing cash flow problems?
Invoice factoring can be used by any industry that sells products or services to another company but in particular industries that suffer cash flow issues due to the nature of their business.
How can an invoice factoring facility help your business?
Why choose Novuna Business Cash Flow as your factoring company?
6 month trial period
A 6 month trial period so you can be sure the product is right for you, followed by a 6 month rolling contract – we don’t tie our clients in for long periods.
Digital onboarding
We are the first in the market to offer a digital onboarding process and have been leading the way with our digital capabilities allowing clients to sign up within 24 hours from the first appointment.
Client Trust Account
Once you become a client you will be given your own trust account, meaning you will get same day availability on your funds. You can also view all of your invoices and payments online at a time suitable to you, 24/7.
No uncleared effects
We have heavily invested in our digital capabilities. This includes the auto allocation of payments using Artificial Intelligence. Ultimately this advance in technology means that our clients access money quicker as well as saving money on interest charges due to auto allocation.
Simple pricing
We aim to make the process of Cash Flow finance as simple and straightforward as possible. Our pricing is very straightforward to understand. For a no obligation quote or an informal chat you can call our friendly team today on 0808 250 0859.
Award winning support
We offer award-winning client services and individual Relationship Managers who are on the other end of the phone or out in the field to visit you in person.
Our factoring service is multi-award winning
We also come highly recommended by our existing customers
"The communication and support has been outstanding. Providing me with all the information I needed regarding new clients coming onto our books. The system they use is so user friendly and the drawdown payments are very efficient in the fast moving world of temporary payroll."
Read full reviewWe've revolutionised factoring companies in the UK with our digital onboarding process
Get in touch
Contact one of our invoice factoring experts on our freephone
0808 258 2297
8:45 - 17:15 - Monday to Thursday &
8:45 - 16:45 - Friday
Specialist recruitment firm sees 60% growth in turnover
Read our latest case studiesWant to learn more about how you can boost your businesses cash flow?
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