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Invoice Factoring

What is Invoice Factoring and how does it work?

  • Invoice Factoring allows you to release cash from your unpaid invoices quicker than having to wait between 30 to 90 days – and sometimes up to 120 days – for your customers to pay you.

  • In addition, we handle your credit control, allowing you to concentrate on other areas of the business instead of chasing up late payments.

    As your business grows, so does the available funding. With Invoice Factoring you don’t need to negotiate new terms as your flexible funding line increases with your turnover.

      • 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 - invoice 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
      • Award-winning service - benefit from our award-winning client service
  • Why do companies consider Factoring Invoices?

    There are a variety of reasons that businesses may choose Invoice Factoring as a funding solution, but the primary reason is that it’s a major boost to cash flow, as cash can be raised almost as soon as services are completed or goods are delivered.

    This makes everything from payroll to business growth much easier, both of which can be major concerns for SMEs. There are other options to Invoice Finance, including loans, overdrafts and peer-to-peer lending, but few offer the same level of flexibility that Invoice Factoring does. The great benefit with Invoice Finance is that the funding grows in line with the business turnover.

    In addition, smaller companies often find that it’s easier to manage their business while Hitachi Capital Invoice Finance is managing their credit control, because they’re less likely to have the full in-house resource to maintain it as effectively as our experts. Invoice Factoring is both a funding and business solution.

  • Invoice Factoring explained
      • You supply goods and services to your customers.
      • You send your customer the invoice made payable to Hitachi Capital Invoice Finance, and send a copy to us.
      • We will give you up to 90% of the invoice amount. At this stage, a service fee is deducted from your account as a percentage of your turnover.
      • The customer settles the invoice in full by making their payment direct to us. When the remaining balance is paid, a small finance fee is deducted from your account, charged as a percentage of the amount lent
      • This invoice clears and we give you the remaining 10% balance minus the finance fee.

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Why choose Hitachi Capital Invoice Finance?
      • 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
      • A one fee solution with no hidden fees
      • Award-winning client service by our team of expert Client Managers
      • Our Relationship Management team are in the field to visit you in person
      • We are part of Hitachi Capital (UK) PLC, a company that is going from strength to strength – we’re here for the long term.
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Invoice Factoring FAQs

  1. What is Invoice Factoring?

Invoice factoring is a form of invoice finance. It is a financial transaction that consists of an invoice finance agreement in which a business sells its invoice (accounts receivable) to a third-party factoring company (the factor). It is a type of debtor finance and is sometimes referred to as ‘factoring’, ‘accounts receivable factoring’ and ‘debt factoring’. The factoring company then provides the credit control service to recover payment of the unpaid invoice.

Is Invoice Factoring a good idea?

Invoice factoring enables a business to quickly raise money and receive an immediate cash injection, improving its liquidity position by selling invoices to a factoring company. Invoice factoring is a good idea for companies who want to relieve their business from the time it takes to chase up unpaid invoices, as well as allowing them to immediately improve their cash flow and focus on other areas of growth for the business.

Why do companies use Factoring?

There are a number of reasons companies may utilise invoice factoring services for their business; primarily, factoring helps companies ease their cash flow concerns by receiving payment of invoices immediately. Slow paying customers can put a strain on cash flow and factoring with Hitachi Capital Invoice Finance gives businesses an option to receive cash in 24 hours, as opposed to waiting 30, 90 or even 120 days to get paid by customers.

Is Invoice Factoring considered a loan?

Technically speaking factoring is not considered a loan as it is a purchase of accounts receivable. The factoring company purchases future receivables (invoices) and provides the business with a percentage value of the invoice upfront. The remaining balance minus a fee is then paid to the business once the invoices have been settled. Rather than a business waiting a significant length of time for an invoice to be paid, invoice factoring enables a business to access cash quickly and easily.

 

How Does Invoice Factoring Work?

The process of invoice factoring involves a factoring company taking ownership of a businesses unpaid invoices. The factoring company releases a percentage amount of the unpaid invoice to the business straight away and then proceeds to take ownership of collecting the invoice payments. The factoring company chases the debtor and on payment of the invoice will release the remaining funds back to the business.

Invoice factoring provides a business with immediate funds, improves liquidity and mitigates cash flow issues arising due to unpaid invoices.

 

Is Invoice Factoring regulated in the UK?

Invoice factoring is not currently regulated by the Financial Conduct Authority (FCA). An industry-wide code of conduct is provided by the UK Finance to ensure a fair service and integrity is provided for invoice factoring services. It is widely accepted that the regulation of the invoice finance sector would contribute to the increasing costs of its services. Therefore, this enables invoice factoring providers to remain competitive and provide a low-cost solution for businesses seeking to utilise invoice factoring services.

 

How much does Invoice Factoring cost?

The cost for invoice factoring is split in to three key areas.

A set up fee for the administration of establishing the facility.

The service fee covers the management and admin costs related to your account and is charged as a percentage of your gross turnover.

Finally the finance fee is the cost of the money you draw down and is charged daily against your outstanding balance.

All reputable finance providers will be transparent about the fees and costs related to the facility prior to signing the agreement.

Should I use Invoice Factoring?

Invoice Factoring has become a popular method of business funding. For businesses who tend to experience longer payment terms with regards to their invoices, invoice factoring can be the solution as it is designed to provide working capital for businesses instantaneously. Moreover, it can be a beneficial service for all types of businesses seeking immediate access to cash without suffering cash flow issues from the 30 to 90 days it takes for the payment of their invoices.