Frequently asked questions

> What are the alternatives to factoring?

This depends on you’re the particular needs of your business. Credit insurance is one available alternative if your priority is to limit risk and obtain insurance against outstanding payments.

On the other hand, if you think your company can benefit from the wider selection of services from factoring, it is worth keeping in mind that a factor can provide indemnity for up to 100% of losses. To get the same from a credit insurance arrangement would require that you pay the additional cost of an indemnity gap.

Order funding is another alternative to factoring. This lets you borrow money in order to pay for the cost of purchase orders. Compared to factoring where you are essentially borrowing the money you have already earned, by order funding you are actually borrowing the money you have yet to earn. Thus the associated cost is usually higher, given the greater risk.

> How will factoring affect my customers?

Your company will still deal directly with your customers, as it has before, and terms of negotiation will remain your company’s prerogative. All the factor takes responsibility for in this regard is debt collection.

> How will factoring effect my bank?

Factors will generally allow funds to be released as promissory notes which your bank should be in most cases willing to consider as high quality debts, and therefore grant you better terms and conditions.

Overall, you can expect this to result in upgrades to your overdraft arrangement, and a stronger relationship with your bank.