With factoring, you sell your outstanding invoices to a factoring company or assign them as security. You typically receive 80 to 95 per cent of the gross invoice value upfront, with the remaining balance paid once the customer settles, less the factor's charges.
- Funding that scales: higher turnover unlocks increased working capital
- No requirement for secondary charges over real estate or personal assets
- Optional inclusion of sales ledger management and credit insurance protection
Key structures you should know
- American / spot factoring — selective funding per invoice, leaving credit control in your hands
- Full-service factoring — includes full ledger management, customer reminders and collections
- Non-recourse factoring — credit default risk transfers entirely to the factoring house
- Confidential factoring — entirely invisible to your customer base
- Reverse factoring — structured via the buyer, widely used across supply chains of major OEMs
When is factoring commercially viable?
Factoring works exceptionally well with B2B customers demonstrating reliable payment discipline, settlement terms of 30 days or more, and healthy profit margins. It is unsuitable for low-margin operations, milestone-based stage payments prone to disputes, heavy credit note volumes, or direct-to-consumer sales.
Across the Brainport supply chain, reverse factoring is widespread: large corporate buyers offer their suppliers early settlement at discounted rates based on the buyer's own prime credit rating. This is usually the cheapest form of working capital finance available.
Frequently asked questions
How much does factoring cost?
Typically a service fee charged as a percentage of turnover plus a discount margin/interest on the advanced funds. Total pricing varies according to annual turnover, average invoice value and debtor quality. Always calculate the annualised cost relative to the liquidity actually released.
Will my customers know I am using invoice factoring?
Not with confidential factoring. With disclosed or full-service factoring they will, as remittance details and credit control pass to the factor. Across most industries, this is now standard business practice and is not viewed as a sign of financial weakness.