Recourse Factoring with Outsourced Credit Control
A guide to recourse factoring with outsourced credit control
Recourse factoring is a funding facility through which businesses can steady their cash flow fluctuations, improve working capital, grow sustainably, and benefit from outsourced credit control.
Here’s how recourse factoring works:
Businesses sell their accounts receivable (invoices) to a factor who will also provide an additional service of outsourced credit control, the business can then receive advanced payment on invoices that have not yet been collected from their client and that remain outstanding. When the payment is due, the factor collects payment from the businesses customers and remits the remaining amount, minus a factoring fee.
Benefits of recourse factoring
Improved cash flow: Invoice factoring can help businesses improve their cash flow by providing access to funds that would otherwise be tied up in outstanding invoices. This can be helpful for businesses that are growing quickly or working towards positive working capital.
Simplified collections process: The factoring company handles the collections process for you, freeing up your time and resources to focus on other aspects of your business.
Cash injection: After the initial set-up, businesses will receive their cash injection within 48 hours.
Here are some key considerations when deciding whether recourse factoring is right for your business:
The cost of factoring: The cost of factoring can vary depending on the size and number of your invoices, your creditworthiness, and the factoring company you choose. Be sure to compare all rates not just headline rates from different factoring companies before deciding.
Is your business eligible: Not all businesses are eligible for recourse factoring, to be eligible the business must:
- Have outstanding invoices with creditworthy commercial customers for goods/services supplied.
- Be able to provide accurate records of the invoice value, date issued and debtor details.
- Have invoices no older than 90 days.
- Issue goods or provide services on an in arrears basis.
Sourcing a recourse factoring company
When seeking an alternative funding provider, do not jump into a deal with the lowest headline rate. Each provider lays out their deals and terms in different ways, with some who apply additional fees hidden within the fine print, or by deeming them as extra services. Through being misled, businesses can incur costly charges.
Invoice financing providers, and in turn recourse factoring facilities, are not regulated in the same way banks are. However, there are those who choose to be members of UK Finance and always adhere to their code of conduct.
Below are some questions you could ask when initially meeting a funding partner:
- What information and documentation will you need from me?
- How much can I borrow against my invoices?
- Are there restrictions placed on how I can use the funding?
- How much time does set up require?
- What is the process of getting started with recourse factoring?
- Are there any additional charges or disbursements which will be charged after the initial set-up?
- Are you a Full member of UK Finance?
- What methods do you use to contact my clients for payments?
- Is your credit control automated or personalised?
Partnership Invoice Finance – about us
At Partnership Invoice Finance, we understand the challenges faced by businesses of all sizes, from start-ups to established SMEs. That’s why we offer invoice finance solutions tailored to each B2B businesses specific needs, with funding capabilities of £1 million.
Our commitment goes beyond simply providing an advance on invoices. We believe that exceptional service is paramount to business success. That’s why we offer comprehensive sales ledger management, from receiving the invoice to the successful collection of payment from your customers.
We recognise that recourse factoring (and invoice finance) is often viewed solely through the lens of prepayment. However, we believe that the true value lies in the quality of service you receive. Our team provides accurate and human-focused management of your sales ledger, fostering strong cash flow through a personalised approach. Unlike automated systems that rely solely on statements and overdue letters, we prioritise regular and direct communication with you and your client, ensuring a seamless and supportive partnership that goes beyond receiving funding.
Are you ready to discover recourse factoring?
