How Invoice Factoring Works in 5 Really Simple Steps

Is your business struggling financially? Are you sitting on various unpaid invoices that are draining your business of funds? Then what you need is invoice factoring.

This is where you can borrow against unpaid invoices and get advanced a large percentage of the total amount owed. It’s a great way to improve your cash flow and get your business back on track, but how does it work?


Step 1 – Finding the Right Finance Company For You

If you’re in a position where you need help financing your company then you’re going to want to make sure you’re using the best financing company for you. Finding the right company is crucial for your business, so to take time to assess a handful of providers and pick the one that best suits your needs.

Ideally you should pick one that has experience within your specific industry, as well as one that offers specific invoice finance services. If they do not list which industries they provide for, simply send them an email and ask – they’ll be more than happy to help answer your questions and this also gives you an opportunity to test their customer service skills.


Step 2 – Passing Checks and Account Setup

factoring checklist

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Once you have chosen the best invoice finance providers for you, you’ll then need to apply for your loan and pass various checks before setting up your account. These checks can vary from company to company, however it is common practice for a finance company to do a credit check on your business.

This is so that the finance company can see your financial situation, ensuring that the money can be paid back in due course and limiting their chances of unpaid fees. If all is well, the finance company will then set up your account and begin the loan process. With us, you may be able to gain funds the very same day you apply.


Step 3 – Gaining Access To Funds

With all checks complete and your account now set up, it’s time to give you the funds you are after. The funds will be based upon the number of invoices you’re claiming against, all invoices should be listed on your schedule of accounts. It’s easy to sell unpaid invoices with the right finance company, no matter the invoice amounts.

Once the invoices are verified the funds will then be transferred to your business. The advance you get can range from 70% to 95% of the gross value of your invoice. With CCC Finance, you can get up to 85% of the invoice and we are able (in some cases) to transfer funds into your account the very same day.


Step 4 – Receiving The Rebate

get your invoice paid

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The rebate settles the loan transaction and is the 2nd installment of the loan. This can be for anything from 5% to 30%, based on your initial advance. So if your advance was for 85% of the invoice, the rebate would be for the remaining 15% (plus fees).

Finance companies have different ways of sorting the rebate. Some companies will distribute the rebate as soon as your customer pays the invoice in full. Others may batch rebates and will provide them weekly or on another specific schedule.


Step 5 – Using The Service Again

Many finance companies will factor invoices on a regular basis, so you can use them on an ongoing basis to ensure good cashflow for your business. Instead of only factoring one invoice, you may decide to factor them all. This is something you can do with any finance company, including ourselves.

It’s a simple process and becoming an ongoing customer benefits you as a business as well as the finance company. Borrowing against invoices gives you more time to focus on your own company, without the worry of unpaid invoices affecting your day-to-day business. It also costs very little in comparison to a short-term bank loan, so it’s well worth doing if your business is going through a rough patch.

Find out more about the way we factor invoices via our factoring service page. Alternatively, if you’d rather speak to us over the phone, you can give us a call on 0845 468 6423 and we’ll be more than happy to discuss your options for you.

Feature image credit: Phonlawat Chaicheevinlikit via 123RF

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