What is a factoring company?
A factoring company buys a business' unpaid invoices in return for a factoring fee which is deducted once the full payment has been collected from the customer. A factoring company enables businesses to release cash by purchasing their invoices at a discount.
Most factoring companies are recourse arrangements, which means that you will be responsible for any unrecoverable invoices.
What is invoice factoring?
Invoice factoring is when a business sells its invoice to a third-party company. It's a form of invoice finance and will give your business an effective way to improve its cashflow position.
The invoice factoring provider provides the credit control service to recover payment of the unpaid invoice. Invoice factoring companies allow you to release cash from your unpaid invoices quicker than having to wait between 30 to 90 days – and sometimes up to 120 days – for your customers to pay you.
As your acting invoice factoring provider we handle your credit control, allowing you to concentrate on other areas of the business instead of chasing up late payments.
How does the factoring process work?
- Supply the goods: Supply your customers with goods or services and invoice your customers as normal.
- Your factoring company will handle the credit control: Your factoring company will release up to to 90% of the raised invoice value. Your customers will pay the factoring company directly and chase payment of the invoices on your behalf.
- You receive the money: Once the customer settles the invoice, the finance company will release the remaining invoice amount to you minus the relevant fees.
What are the advantages of working with Novuna Business Cash Flow as your invoice factoring company?
We are an award winning factoring company
Our invoice factoring service comes highly recommended by our 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 review
A very professional and yet friendly company to deal with.
The whole team have been keen to understand how our business works including the peculiarities of our industry and as a result, our specific needs for working capital. Subsequently, they have been supportive of our changing needs and open to suggestions to help improve our business model and profitability further.
Competent staff, slick technology. Would recommend
Halo is one of the smartest bits of tech I have seen & every team is only as good a it's people and I would like to take this time to actually specifically point out Alex Hall & Claire Davies. Alex is an account manager that has continually improved during our time working together and is a real credit to Novuna. Claire has been exceptional from start to finish; meticulous in her work and very patient with us at every temp - an absolute star. It is a shame that the email address went to a generic platform and not each individual. I totally understand why this works better for companies but it did mean that the personal element was lost meaning that starts like Claire will be harder to identify from a customer point of view.
High recommedation for Novuna Business Cashflow.
My company was in need of invoice factoring to assist with the cashflow due to the nature of debtor days with our clients. After looking at a number of options, the right decision was made to work in partnership with Novuna Business Cashflow. Right from setup through sales to customer service, 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. This has allowed my company to look at positive growth knowing we are safe financial hands. I would highly recommend Novuna Business Cashflow 10/10.
Set up went well and communication was good.
Syed and Vipul were extremely helpful top class service
Very helpful from the start
Great people made this process very straightforward.
Jemma from Novuna (formally Hitachi) was brilliant. Worked with us throughout the process and succeeded when some others had failed. Carried out the necessary checks with a smile and cheery demeanour, making what would have been a laborious process quite manageable.
Teething problems -Maybe ?
It's still early days so I may alter this review at a later date. However with retentions and concentration limits and other items, were finding were not getting 85% up front, were probably getting nearer 70% Also when a customer pays the remaining allegedly 15% due to us seems not to be credited to become available. For instance a customer paid Â£6918 and a customer paid Â£1300 hence we should see an extra Â£1330 available (15% of both these payments). However availability seemed to go down and not up by Â£1330 !!! Hard to work out where this 15% has actually gone ? I'll re-submit this review when things become clearer.
I found Hitachi true to their world in every aspect of the service they promised. I can't recommend enough.
Excellent Customer care and service.
Excellent customer service from start of initial conversations, right through to finally becoming a customer. The whole team involved are a credit to Hitachi, they were accommodating and informative the whole way along the process. I would highly recommend Hitachi to future clients and business associates. Thanks Alan.
I really enjoyed working with the Hitachi team, professional, helpful and really good people to deal with. They have made what could have been a very difficult experience a pleasure. Very happy to recommend them.
Hitachi made the process of moving factoring facilities painless, bearing in mind we previously had our facility with the same provider since 1997. I cant fault Hitachi's staff and processes and we are delighted with the move.
Staff excellent all together professional
UK invoice factoring has been revolutionised with our digital onboarding process
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 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 clients for payment
Disadvantages of invoice factoring:
There are some disadvantages of invoice factoring too - your clients will be informed that you’re using an invoice factoring service, and your factor will contact them to collect on factored invoices which means that:
- The image of your company may be affected, particularly if your clients assume that you are not established enough to oversee your own credit control
- You won’t be able to maintain your standard approach to client communication
Spot factoring is a way for a business to access funds by selling unpaid invoices to a 3rd party, a spot factoring company, on a one off basis in order to receive payment quicker.
Reverse-factoring is a financing option where a 3rd party financial provider finances the supplier on behalf of the buyer. The process involves the supplier, the buyer and the finance provider .The supplier sells the buyer’s unpaid invoice to the finance provider and receives the cash quickly, the buyer also gets longer to pay for its goods.
Account Receivable Factoring
Account receivable factoring provides businesses with an option to finance their venture without taking out a loan. This is a type of debtor finance where SMEs sell its invoices to a third party at a discount, in order to provide an immediate cash injection. There are many reasons why a business may factor an invoice, including increasing cash flow and mitigating credit risk.
Recourse and Non-Recourse Factoring
Resource factoring is a form of finance where a company sells its invoices to a factoring company. The factor pays the company a percentage of their cash value and then chases up payment of the invoices on behalf of the company. Non-Recourse factoring is a form of finance where a company sells its invoices to a factor and receives a percentage of the cash value from them.
Debt factoring is a finance facility provided by a debt factoring lender to help businesses leverage their acccounts receivable enabling them to instantly inject cash into the business. The debt factoring company pays the business a percentage of the total amount charged to the client and usually takes full responsibility for collecting the payment from the buyer.
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.
Invoice factoring can be used by any industry that sells products or services to another company but in particular industries that suffer cash flow problems due to the nature of their business.
Industries that experience high production costs, seasonal sales slow downs, slow paying clients, experience unexpected growth and other unpredictable costs affecting their day to day operational cash flow use factoring as a non debt solution to their cash flow problems.
These industries will include (but are not limited to) manufacturing, construction and service industries, trucking companies and staffing agencies.
Invoice Factoring FAQs
Want to learn more about how you can boost your businesses cash flow?
Our Cash Flow Resource Hub has been set up to help SME's with cash flow finance advice, tips and resources to help with their cash flow position.
We explore ways you can begin improving your cash flow situation and start getting your business on track to positive cash flow.