Companies use invoice factoring as a method of reducing cash flow problems by accessing money against sums owed on sales invoices. Factoring enables cash to be accessed very quickly, often within 24-hours and is a viable alternative to a company having to increase its overdraft or take out a bank loan.

Invoice factoring is offered by financial brokers, such as Touch Financial and is a reasonably simple concept. The client company invoices its customer for the service or goods provided and a copy is sent to the invoice finance broker. The broker then presents the client company with a sum of money, usually between 80% and 90%, of the total value of the invoice.

Once the finance broker has succeeded in securing payment of the invoice the balance is paid over to the client company, minus the agreed brokerage charges.

One of the advantages of factoring is that it is the broker who becomes responsible for collecting payment of the invoice rather than the company that issued it. This enables the client company to concentrate on its core business activities rather than having to take the time and effort to recover the debt. It also saves on the cost of phone calls, statements and other correspondence, not to mention salaries to credit control staff, as all this is handled by the broker.

Another advantage of invoice factoring is that it is suitable for a wide range of businesses, small, medium and large; from start-ups to well established companies. Often, companies with a minimum turnover of £250,000 (excluding VAT) are considered suitable to take advantage of invoice factoring.

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