What Is Debt Factoring In Business?

Lets explore what is debt Factoring in business.

Debt Factoring or Debt Finance is a common type of finance that is used by UK businesses. When a company is owed money from other businesses (Debtors), this can be used as security to raise finance.

A bank or specialist factoring company will purchase the debt, making the money available as soon as the invoice is raised. Then when the invoice is paid by the customer, the balance is cleared with the factoring company.

This helps companies manage their cash flow and grow, without having to wait 30-60 days to get paid by their customers.

Basic Criteria For Debt Factoring:

  • The company must be providing goods or services to other businesses (B2B)
  • The company must give credit terms (i.e 30 days to pay)
  • The debt must be readily collectable upon due date

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