What does CHOCS Mean?
The acronym CHOCS is an abbreviation of Client Handles Own Collections. It refers to a type of invoice finance facility where the client retains credit management and collections in house rather than handing them to the funder.
Where CHOCS sits between factoring and discounting
Invoice finance normally splits two ways. With factoring the funder runs the sales ledger and chases your customers. With invoice discounting you keep collections and the facility is usually confidential, so customers never know a funder is involved.
CHOCS is the middle ground. The facility is structured as factoring, so it is disclosed and the funder can step in, but you carry on doing the collections yourself. It is typically offered where a business wants factoring terms or pricing but has a credit control function it does not want to lose, or where the funder is not yet comfortable granting full confidential discounting.
In practice it is often a stepping stone. Funders use it for businesses that do not yet meet the criteria for confidential invoice discounting, usually on grounds of size, systems or trading history, with a view to moving them onto a discounting facility once the ledger has been proven. If you are being offered CHOCS, it is worth asking what would need to change for full discounting and over what period.
Related terms
See also advance rate and recourse period.
Read more about invoice discounting, the facility type that lets you keep collections in house, or invoice factoring, where the funder collects on your behalf. For the full range of facilities, see invoice finance.
Bolton Business Finance is a whole of market commercial finance broker. Call 0161 546 9128.
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