Factoring and invoice discounting


Factoring - also known as 'debt factoring' - involves selling your invoices to a factoring company. In return they will process the invoices and allow you to draw funds against the money owed to your business. They will also take responsibility for your sales ledger.

You can use factoring to improve cashflow but it can also be used to reduce administration overheads. Invoice discounting is similar but your business retains control over your sales ledger.

Your business may be suitable for factoring or invoice discounting if you have:

  • an annual turnover of at least £50,000, although some factors will consider start-ups and smaller businesses
  • a good spread of customers - there may be funding restrictions if a single customer accounts for more than about a third of turnover
  • simple, non-contractual debt
  • low levels of debt more than 90 days overdue
Your business may not be suitable for factoring if you:
  • sell to the public - factoring is only available for sales to commercial customers
  • have too many small invoices
  • have too many disputes and queries
  • are not a sound, reputable and trustworthy business
  • have customers that make part payments or stage payments
  • have complex contractual arrangements or warranty provisions
Factoring is more complex than some other forms of funding. You may want to take professional advice before using factoring for the first time.

The process


Factoring provides a fast prepayment against your sales ledger. It allows you, at a cost, to improve cashflow by effectively selling your unpaid invoices to a factoring company.

When an invoice is raised

  • You raise an invoice, which has instructions to pay the factor directly and send it to the customer. Send a copy of the invoice to the factor
  • The factor makes an agreed percentage of the invoice available for you to draw on
  • The factor issues statements to the customer on your behalf. It operates credit control procedures including telephoning the customer if necessary. You will agree how to contact the customer with the factor beforehand
When an invoice is paid by the customer
  • The customer should pay 100% of the invoice directly to the factor
  • The factor pays the balance of the invoice to you
When an invoice is not paid

If an invoice is not paid, responsibility for paying the debt will depend on the type of agreement - either recourse factoring or non-recourse factoring. In recourse factoring you are liable for the debt, and in non-recourse factoring the factor takes on any bad debts.


The factor will take a fee when they receive the invoice. They will also charge a ‘discount charge’ which works like interest and is calculated against the balance of funds drawn on a monthly basis.

Invoice discounting

Invoice discounting is an alternative way of drawing money against your invoices that allows you to retain control over your sales ledger.

You will pay a fee to the invoice discounter, usually a percentage of the value of the invoices or an agreed fixed fee and discount (interest) on the net amount advanced. They will be notified of the invoice details electronically - through downloads of sales day books or invoice listings.

Once they receive notification, the invoice discounter will make funds available at the agreed percentage rate, which you can then use. As you receive cash from debtors you pay it the invoice discounter, reducing the outstanding balance and making the remaining amount available.

Pros and cons


  • Factoring and invoice discounting can boost your cashflow
  • Prices are competitive because of the number of factoring companies
  • Outsourcing your sales ledger while frees up your time to manage the business
  • Factors may give you useful information about the credit standing of your customers and they can help you to negotiate better terms with your suppliers
  • Factors can be an excellent strategic and financial resource when planning business growth
  • You will be protected from bad debts if you choose non-recourse factoring
  • Cash is released as soon as orders are invoiced
  • Factors will credit check your customers and can help your business trade with better quality customers
  • Factors will restrict funding against poor quality debtors, so you will need to manage these funding fluctuations
  • In order to end an arrangement with a factor, you will have to pay off any money they have advanced you on invoices if the customer has not paid them yet. This may require some business planning
  • How the factor deals with your customers will affect what your customers think of you. Make sure you use a reputable company that will not damage your reputation

Common mistakes

When entering into an agreement with a factor, it’s important that you understand what costs you are likely to incur, what your contractual obligations are and what your rights are should your circumstances change. Otherwise, you may be faced with unexpected charges later on.

You should compare offers from several companies and get professional advice before making a commitment to a factoring or invoice discounting provider.

Funding sources

Factors can be independent, or subsidiaries of major banks and financial institutions. The Asset Based Finance Association (ABFA) has a list of providers, with details of their turnover requirements and the services they offer.

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3 results found 
Huddersfield house developer doubles target to raise £22,000 for charity

Friday 26 May 2017

Huddersfield-based house developer SB Homes has more than doubled its charity ball fundraising target, making £22,000 for two local charities. The event was organised to mark the firm’s 20th anniversary and took place at Casa in Brighouse on Saturday evening. Kirkwood Hospice and Forget Me Not Children’s Hospice will receive an equal split of the vital funds raised. A total of 214 friends, family, suppliers, clients and business people from the property industry attended the ball. They were greeted with a drinks reception, followed by a three-course dinner, dancing, casino tables and live music from musician Steven Heath. Stephen Byram, managing director of SB Homes said: “The ball went really well, the atmosphere was great and the singer got everyone up dancing. We wanted to have a fantastic night for our 20th year in business. But more than that, we also set out to support causes that are really important for our town. “Most people within West Yorkshire know someone who has been supported in some way by these hospices. Kirkwood Hospice is particularly close to me and my family — my wife’s nana passed away there five years ago, and my mum attends their weekly support sessions. She has made lots of friends and her confidence has skyrocketed since going there. In fact, she’d rather go to Kirkwood than have a holiday! What they do is genuinely incredible.” Both charities care for local people and children living with life-limiting illnesses and provide support for their families and friends, free of charge. Kate Leadbeater, Partnership Development Manager at Kirkwood Hospice said: “Kirkwood Hospice really is very lucky to have SB Homes as a supporter and we appreciate everything that they have done for us. Their generosity will make a huge difference to those in Kirklees who rely on our services. “It’s also quite poignant that the firm chose to support us in its 20th year, just as we are celebrating our 30th year!” Samantha Loucas, corporate fundraiser at Forget Me Not Children’s Hospice added: “We are so grateful that SB Homes chose to support us — £22,000 is a fantastic achievement and we truly can’t thank them enough!” Huddersfield Interiors was the event’s headline sponsor, with other main associates including Newlay, Easy Bathrooms and Ramsdens Solicitors. The final total of over £22,000 was raised from a combination of ticket sales, sponsorship funds, donations, a live charity auction, a table fundraiser and silent auction organised by See It Now Sports. Lots included a diamond, catered chalet holiday in French Alps, signed Anthony Joshua shorts and a break to New York, to name a few. Early next month, SB Homes will launch phase two of its Empire Works development in Slaithwaite, Huddersfield as well as a show home. The properties include 24 2-bedroom apartments, as well as four 4-bedroom family houses.
Posted by Byram, Amy
Yorkshire businesses get behind £10k fundraising campaign

Tuesday 04 April 2017

As preparations for the charity football initiative ‘The Match 2017’ continue to gain momentum, the latest supporters to get on board are Huddersfield-based businesses Magic Rock Brewing and Lindley Financial Management. The inaugural event, which will take place on Saturday 20th May at The MBI Shay Stadium in Halifax, will bring together footballing amateurs and Huddersfield Town legends, in a game that will help to raise much needed funds for Yorkshire Air Ambulance. Both firms have dug deep for the cause, and have each donated £500 in return for becoming an official shirt sponsor. With a running cost of £12,000 per day for the two yellow helicopters to remain active, the organisation relies entirely on donations to continue saving lives. And now further support is required to keep The Match proceeds growing, and help this initiative reach its £10,000 target. Magic Rock Brewing was founded by brothers Richard and Jonny Burhouse and inspired by brewing traditions and the US craft beer scene in particular. The award-winning and ever-growing company produces an innovative range of idiosyncratic beers in their 4,000sqft Tap Room, close to the town centre. When approached via social media and asked to get behind The Match, Richard says there was never any doubt about getting involved: “We are a community focused business, keen to support local initiatives wherever possible. We are aware of the excellent work the air ambulance does for the region, and wanted to do our bit.” Regular charity supporters Lindley Financial Management also had no qualms about signing up to help the event. The independent financial advisers, based in Brighouse, also support Pilgrim Bandits Charity, aiding soldier amputees injured in Iraq and Afghanistan. Commenting on The Match, director Mark Learmont, said: “I hope as many people as possible attend on May 20th. Nobody knows when they may need the help of the Yorkshire Air Ambulance – supporting them is vital and their services must be applauded.” Organiser, and founder of grassroots football specialists Coaches Club, Dave Learmont, adds: “I am so thankful that two local businesses have gone the extra mile to raise awareness and proceeds for this fantastic charity. 100% of all funds donated will go to Yorkshire Air Ambulance, and these shirt sponsorships put us well on our way to hitting our huge target.” But the search for sponsors isn’t over, with the players themselves now looking for individual support. For only £150, companies will secure their name and details on the official match website, alongside their logo on the programme. The players and Town legends are also appealing for members of the public to get on board and buy tickets. Available at £10 for adults and £5 for children, the aim is to provide a fun, low cost day out for all the family. Pre-match and half-time entertainment – as well as a couple of extra special guests – will be revealed over the coming weeks. All tickets must be purchased before the game, via justgiving.com/teams/coaches-club. Further information and updates about The Match and player sponsorship can be found at The Coaches Club website, and on Twitter @cccmatch.
Posted by Scriba PR Limited
Vizulate becomes Approved Supplier on Digital Enterprise scheme

Friday 10 March 2017

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Posted by Vizulate Digital
3 results found 
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