The terms factoring and invoice discounting are often misunderstood. The distinction between the two is in fact very simple. Factoring involves a finance company using a company?s outstanding sales invoices as security for a loan. The company then agrees to outsource their sales ledger function, namely, their invoicing, credit control and debtor collection to the finance company.
Invoice Discounting also involves the finance company using outstanding sales invoices as security for a loan, but the company continues to run its own sales ledger function, raising its own invoices, carrying out its own credit control and collecting its own debts.
Factoring is generally suitable for businesses with turnover less than 1 million, whilst invoice discounting will be suitable for turnover in excess of 1 million.
Some invoice finance companies will allow businesses with turnover less than 1 million to use invoice discounting, providing that they have appropriately qualified staff to collect the outstanding debts, as well as adequate accounting systems and the ability to produce timely management information.
Invoice finance lenders havea thorough understanding of the invoice finance and company rescue market. We have personal board level relationships with each and every of the invoice finance providers. We are able to match companies with appropriate lenders and negotiate the fees and terms of your invoice finance agreement on your behalf.
Debt Consolidation
Tags: business finance, company rescue, factoring
Posted March 16, 2012 by Jeffrey Eow under Commercial Banking
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Source: http://www.creditfriendlyfinance.com/invoice-finance-alternative-commercial/
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