What is debt factoring and how does the process work?

Award winning debt factoring provider in the UK.


Debt factoring definition

Debt factoring is a finance facility provided by a debt factoring lender to help businesses leverage their accounts receivable, enabling them to instantly inject cash into the business.

Debt factoring companies pay the business a percentage of the total amount charged to the client, usually taking full responsibility for collecting the payment from the buyer.


How does debt factoring work?

Debt factoring is a form of business funding and uses one of the most significant assets your business has - your accounts receivable.

1

Your debt factoring provider will chase the debtors for payment of the invoices and collects the full invoice payment from your customer and pays you the outstanding amount, minus a small fee.

2

The business will be given up to 90% of the invoice value almost immediately from the point of raising the invoice, therefore reducing the cash deficit for the small business.

3

Debt factoring companies are proven to help businesses grow and prosper and is an excellent alternative to a bank overdraft.


What are the advantages and disadvantages of debt factoring?

Advantages of debt factoring:

  • Improved cash flow - release money tied up in unpaid invoices and boost your cashflow
  • Flexibility - your funding line increases at the same rate as your turnover meaning that you don’t need to renegotiate terms
  • Save time- relieve your business of the burden of credit control and concentrate on your core business
  • Bargaining power - debt factoring can help you to negotiate better terms with your suppliers
  • Faster growth - grow your business at a much faster rate due to the flexible funding line

Disadvantages of debt factoring:

  • Reduces overall profit - the factor always charges a percentage of the overall invoice value
  • It's the solution to only one problem - factoring solves just one problem - cash flow limitations due to clients paying later than they should be. It should therefore only be used to solve this problem, rather than business loans and lines of credit which can be used to help with all sorts of business needs
  • The finance company will contact your customers - the factoring company contacts your clients at the start of the relationship and will be in contact to say they will be managing your invoices. The factoring company may also contact your clients if any issues arise such as payments being late

We are an award winning debt factoring company

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."

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Get in touch

Contact our friendly UK advisors on our freephone

0808 250 0859

8:45 - 17:15 - Monday to Thursday &
8:45 - 16:45 - Friday

What are the main benefits of using debt factoring companies?

Expand your operations

Invest in stock, machinery or equipment

Employ new members of staff

Fix long-standing issues with cash flow


Debt factoring has been revolutionised with our digital onboarding process


Debt factoring FAQs

Get in touch

Contact our friendly UK advisors on our freephone

0808 250 0859

8:45 - 17:15 - Monday to Thursday &
8:45 - 16:45 - Friday

Why choose Novuna Business Cash Flow as your debt 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 service

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.

What our customers say


Alternative debt factoring products from Novuna Business Cash Flow

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Spot Factoring

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.

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Reverse Factoring

Reverse-factoring is a financing option where a 3rd party financial provider finances the supplier on behalf of the buyerThe 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.

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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.

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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.

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.

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If your customers are consumers, please contact our consumer finance division.

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