As we approach the festive period, cashflow within a business can be crucial at this time of year. There are wages to pay early and even bonus payments. As the month of December is generally a shorter working month, this can extend payment terms if that is how a business operates.
Some businesses have full invoice finance facilities in place, which can mitigate this, however some may only need this type of facility for a very short period of time. With the above in mind we are focusing this newsletter on ‘Spot Factoring’
Spot Factoring is a great way for businesses to fund their cash flow flexibly by selling an individual invoice at a discount to a third party- (Spot Factoring Company)
So how does Spot Factoring work?
- A business assigns the invoice (typically large, upwards of £50,000) to a spot factoring company, having already established and agreed the rates and terms.
- The Spot Factoring company verifies the invoice and advances a percentage of the invoice to the business client upfront, typically at (70-85%)
- When the end customer comes to pay the invoice, the factoring company collects the debt and makes the remaining balance available to the business client, minus their fees.
Spot Factoring can unlock the funds tied up in an individual unpaid invoice, so that businesses can receive 1% of funds without waiting for the end customer to pay. For larger invoices this process can provide a large cash boost for the business client. With these funds, businesses are able to pay suppliers and payroll on time, as well as injecting cash into a new project or product.
If you would like assistance with regards to the above then please feel free to contact myself or the Key team today.