• Explaining The Factoring Product Decision Tree

    How to decide which factoring product you need.Factoring is a simple service, but there are a number of product options that need to be understood in order to select the right service for you.

    We can guide you through this process over the phone, just call Sean in confidence on 03330 113622, or you can use our free Online Product Finder.

    Factoring Product Decision Tree

    There are a number of simple questions to answer, within the product decision tree, that will determine the type of factoring product that you need. They are as follows:

    1. Do you want ongoing funding against all your invoices, or to just choose a few to have funded as and when needed?

    2. Do you want the service for UK and customers abroad, or just UK customers?

    3. Do you want a full credit control service, or are you happy to supplement the credit control activity?

    4. Are you worried about customers failing?

    5. Do you mind if customers know you are using a factoring service?

    The answers to these question determine your product selection. Below I will address your answers to each question in turn.

    Funding All Invoices Or Just A Selection?

    If you are looking to maximise your working capital, funding against all your invoices might be your preference. This is commonly called a whole turnover facility. By submitting your entire sales ledger for funding, in addition to maximising the funding generated, you are likely to find that they cost is less than if you choose a selective facility.

    Alternatively, if you just need a little help over a current cash flow problem, or you think you might want to dip in and out of the funding in the future, a selective, or spot facility might suit you best. This type of facility commonly avoids any commitment to minimum turnover levels. However, you are likely to pay a premium for that flexibility.

    UK And Or Export Debtors?

    If you only want the service for sales to UK debtors that is the simplest facility. However, some funders will also handle sales to export territories overseas, either in addition to UK sales or exclusively. Several factoring companies will fund against export debts, however very few are set up to provide a comprehensive credit control service for export sales. This will affect your choice of factors, if exports are important.

    Full Or Supplemental Credit Control?

    Again the service provided by different factors will vary. Some provide a comprehensive credit control function, such that you will not need to retain any credit controllers yourself. However, in other cases it is a basic service, perhaps focusing on the largest debtors, which may need to be supplemented with your own efforts. If you don't want any credit control support at all, that is called an invoice discounting service.

    Are You Worried About Customers Failing?

    If you have a well spread sales ledger, you may decide that you are not worried about any single debtor failing, and being unable to pay you. If you have prime debtors, or significant balances to some customers, you may want to hedge against the customer failing. You can do this by adding a "bad debt protection" option to your facility. This protect you if your debtors become insolvent, and normally comes at a cost premium. The exact terms, and level of cover, will vary between providers.

    Do You Mind If Customers Know You Are Using Factoring?

    The simplest, cheapest option is normally what we call a disclosed facility. That is where your customers are aware of the involvement of a factoring company. However, if you don't want customers to know, you could opt for "confidential factoring". With that facility, all the credit control and debtor contact is conducted in the name of your business, dedicated telephone numbers are answered as your business. This means that customers are unaware that you are using a factoring service.

    Other Options

    In addition to the above options, there are a number of other services that you may, or may not want to add onto your factoring arrangement. They include trade finance, to fund imports. Payroll management, to take over the paperwork involved with running a payroll. There are also other offers and differences that we would be happy to explain to you.

    Alternative Options

    See our free guide to the various different: Types Of Factoring.

    If you are want to consider other option instead of factoring, see our article: Alternatives to using factoring.

Share with:


I have read and accept your:
Customer Terms and Conditions.
Call me back


Latest Blog Post

Examples of just a few of our finance partners:

lloyds bank
ultimate finance group
metro bank sme finance