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• 27 Oct

  Payment Factoring

  Payment factoring is a term not commonly used within the invoice finance sector. However, it is often used by businesses to describe an invoice factoring service. In some ways, it's a better description of the service.

  Payment Factoring

  

  Logically, it makes more sense than the terms we typically use, e.g., invoice factoring or debt factoring. From the perspective of the business using the service, its about the payments that they are expecting from their customers. The service accelerates those payments so that the majority of the value of a sale is received immediately. Meaning, they don't have to wait to get their money.

  Get Paid Today

  Essentially, if you have a payment due from a customer, you could get access to that today - regardless of when your debtor pays. Terms are commonly 30 days in the UK, with many debtors taking even more credit. This additional credit period may be agreed upon, or they may just delay their remittance to improve their own cash flow situation. Late payments have become the cash flow curse of many UK suppliers.

  These receivables financing services (finance against outstanding receivables owed by debtors) accelerate the receipt of those monies. It no longer matters when the customer pays, you get a prepayment against that transaction immediately.

  Types Of Receivables Financing

  As with many products, there is a range of different "flavours". Each has different features that may suit particular businesses. For example, one business may be worried about bad debts. There is a bolt-on called "credit protection" that reduces that risk.

  In another case there may be export debts that need funding or the supplier may also require a payroll management bolt-on. There are so many product options, that you are likely to benefit from some independent help to figure out the option that is best for you.

  To read more about the product variations, check out our Guide To Factoring which explains the various options and differences.

  By Glenn Blackman