Factoring is known to provide an answer to companies who have slow paying customers and those who need a boost in their working capital. Others even see it as a means to protect themselves against noncollectable accounts and losses from bad debts. At present there are notable UK factoring companies like workingcapitalpartners.co.uk who provide their services to the market. They offer many different services and types of factoring. These variations occur as different companies may provide for different rates, terms and conditions. Rest assured these are always communicated to their clients as transparency is one thing that keeps this business growing.
First and foremost let us describe the process. The owner of the receivables or invoice sells these to a factor who in turn gives a percentage of the value in advance. The factor will chase after and collect the payments from the customers and once the whole amount has been fully collected, the balance left of the invoice’s value will then be given by the factor to the seller. This will then be less any fees or commission which both parties have agreed upon. So what services do these UK factoring companies offer? Here’s a little info for all of you.
For one, there is this thing we call Recourse. Here credit protection is not part of the agreement. In here you are responsible for buying back the invoices which have not been paid by your customers within the agreed upon period. Even if the factor has purchased the invoices from you and given you a percentage in advance of their values, you assume the risk of uncollectability. Fear not though as factors help you out to avoid having these buy backs. As part of their services they will check up on your accounts and customers to see their ability to pay. Also they can take care of managing your receivables alongside your own in house team.
If however you do not want to assume any risk of uncollected amounts you may opt for Non Recourse. They will completely assume the risk and thus relieve you from any bad debts.
There is also what we call the Modified Recourse where the factor carries receivable insurance for amounts uncollected due to inability to pay for financial reason. For other causes other than that the company must buy back the invoices.
In the event that you don’t want to subject all your receivables to a factor but would prefer a one time transaction, UK factoring companies may provide you with spot or selective factoring. This will allow you to choose which receivable to use and when to use it.