Factoring is essentially used when a sale is done on a credit term between the seller and the buyer. The invoice that is raised to facilitate the transaction can be financed through Factoring.
Most invoices have extended credit terms of 30, 45, 60, 90 and 120 or even up to 180 days in some businesses. A company can either wait for it’s customer to pay until the due date, offer a discount to get the customer to pay early, or finance the invoice.
Initially we determine if your business fits its profile. Then we analyze your receivables, checking the credit of your debtor and the validity of the invoice.
Once verified, (Normally within 3 hours) we will advance an agreed prepayment (i.e between 70% to 85%) of the value of the invoice. When your debtor makes the payment, as agreed with you and your debtor, a factoring fee is deducted from the payment and the balance is paid back to you.
Factoring is custom-made for entities that are growing by leaps and bounds. Often, a company grows so fast that it quickly outgrows a traditional line of credit. This makes it difficult for the company to seize market opportunities that will help it stay on its growth track. Using factoring, it is almost impossible to outgrow a credit line. With factoring, the line is based upon the amount of qualified receivables, and limited only by the factor’s lending limit.
A Good Way to Ensure Equity Retention:
Factoring allows a company to finance without diluting equity. This is a critical issue to current shareholders.
Taking Advantage of Supplier Discounts:
A company can factor an invoice to take advantage of a supplier discount. Over time, this could amount to significant savings.
Eliminating the Need to pledge collateral:
Using factoring, you can often structure a facility that doesn’t require any assets to be pledged as collateral. It analyzes the strengths of your debtors and provides you with a facility against your receivables.
Simplifies management of sales ledger and receivables:
You could have a close tab on the Sales Ledger and receivables using the state of the art system of the Softlogic Finance Factor thereby reducing the requirement for more staff. This will also enable you to have access to more information and total reconciliation analysis including digitalised matching details of each settlement of the debtor.