Factoring is about selling or assigning interest in your invoices or receivables to the financial institution for a small discount. This facility is known by many other names like:
- Receivable Factoring
- Invoice Factoring
- Invoice Discounting (this is slightly dissimilar to factoring)
A large portion of the industry is still unknown but it is quite huge (more than £ billion turnover got factored in previous year), old and tested financial facility that is amiably used by many corporations with multi-billion turnaround. This facility has recently been established for medium sized businesses.
Factoring facility permits the small and medium sized enterprises or SMEs to benefit from their biggest asset – their outstanding invoices, to acquire financing. A lot of fresh and growing enterprises face difficulties in getting finance from traditional banks because of time length in business, financial strength of the business and profit possibilities. Factoring, on the other hand, they are empowered to raise funds from already approved invoices in shortest time that is as less as 24 hours. Other finance options may normally need 2 years in business with profit.