Factoring

How factoring works

The arrangement defines the eligible ledger, advance, service charges, funding cost and collection responsibilities. Customers may be notified to pay the provider. Bad-debt protection is a separate feature unless expressly included.

Practical UK business example

A small wholesaler uses factoring to obtain advances on eligible invoices and outsource collection work. It checks how the factor will communicate with its customers.

Illustrative example only; not a finance quotation or a client case study.

Why it matters

It can combine cash-flow support with outsourced credit administration, potentially freeing internal staff time.

Limitations and common misconceptions

Factoring does not necessarily mean the factor takes all non-payment risk. Recourse, disputes, minimum fees and notice periods require careful reading.

Explore invoice finance to discuss how the structure relates to your business.