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Factoring Information

Single Invoice Finance or Spot Factoring

There can be times when a business wants to improve cash flow but doesn't want to consider a complete factoring service or outsourcing credit control, as this could impact customer relations.   Sometimes a business might require collection help with one or two invoices.  It's possible to obtain one-off invoice factoring against a single debtor.

The concept of single invoice finance, or spot factoring, is still relatively new but there's a small but growing network of single invoice finance providers in the UK.  Single invoice finance is a solution that all companies can consider. It's different to factoring in that it's the purchase of one or two invoices.

What type of businesses should consider single invoice factoring?

Obviously a business that trades with only one customer would benefit from single invoice finance, but it can also be useful for businesses with seasonality.  As the name would suggest, it's ideal where you simply want to raise finance against one particular customer and not against your whole sales ledger.  It could be that you simply want to raise funds against a specific project.

The flexibility of single debtor or single invoice finance is making it a highly popular option. The factoring companies offering these services tend to be very specialist.

Single invoice finance can work alongside other banking facilities such as overdrafts or loans but is not suitable for companies that already have a factoring or invoice discounting service in place.

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What are the advantages of single invoice finance or spot factoring?

Spot factoring or single invoice finance facilities are not as intrusive as a full factoring service and generally the lender is less controlling.  A business can enjoy greater financial flexibility picking and choosing which invoices to factor, using the invoice funding service as when required.

Most single invoice finance agreements don't have clauses that would lock you in and generally there are no "break fees" when you leave a single invoice contract.  Your business remains in control of its ledger and collection.  In the main single invoice finance companies do not come in between the business and its customers.  Even so you can often still release up to 95% of the invoice value.

Single invoice factoring can be completely confidential so your customers remain unaware that the service is being used.  The relationship with the customer remains very much in the control of your business and collection of the debt remains your responsibility but the pressure of collection is reduced as you already have the funds from your factoring company.

What's more, if your customers are aware that you're using a single invoice finance company they may even feel obliged to pay their bills more promptly further improving your cash flow.  Your customers will not want to put at risk their credit rating, as non-payment to one supplier may impact their rating with others.

As with other factoring services when you use single invoice finance security does not need to be offered to obtain the funds, the factoring company will take the invoice as security.  A business can sell credit-worthy invoices to the single invoice factoring company and receive a direct working capital injection - allowing them almost cash-on-delivery terms i.e. send today and get paid tomorrow.

As with other forms of invoice finance, a single invoice factoring arrangement benefits businesses that won't get paid for 30, 60 or possibly 90 days or more by paying up to 95%  against an invoice value.  The factor will review the creditworthiness of your customer and will usually provide funds within 24 hours.   Generally there won't be a minimum or maximum invoice value or turnover requirement with single invoice factoring although some factors do have a minimum invoice value of £3,000.  Typically each invoice will be regarded as an individual transaction and not part of a portfolio but again there can be exceptions.

When the invoice factoring company completes its due diligence process, which should generally take two or three days, you're able to present invoices for single invoice finance. Although a spot factor will examine the underlying business and take account of its future prospects, the main concern is that the invoice being purchased will be paid. Once the invoice factoring company receives an invoice, it'll check the creditworthiness of the customer invoiced and ensure that the sale to your customer has been satisfactorily completed.

Once this has been done your customer will be informed of the purchase and you receive the appropriate funds.  At the end of the period of credit your customer will pay the invoice factoring company directly.

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Single invoice factoring services improves up cash flow and liquidates working capital. Many companies are already benefiting this service and the take up is sure to increase as it becomes better known.

There may well have been times when you've fulfilled a significant order for a customer and you've had to use a vast majority of your working capital deliver.  Now until that customer pays you the business will struggle for funds. In todays climate it's likely that your local bank won't lend you money and as a results perhaps your suppliers are starting to squeeze you which in turn prevents you from completing further delivery of orders.

Often a business looking to grow, perhaps even with a full order book, can find its self hampered by a severe lack of working capital.  This is where spot factoring can help.  Unlike traditional factoring where the business, requesting the factoring services, hands over their sales ledger to the invoice finance company; with spot factoring you can use it as and when required.   You can turn it off and on.

While factoring has been around for centuries, single invoice or spot factoring is a much newer advance in business finance.  It is a fantastic option to release short term cash; providing those funds required for expansion.

Now, instead of waiting for 60, 90 or possible 120 days for payment, your business can immediately invest the necessary cash to support business growth.  You're no longer hampered by the whims of your customers payment policies, but single invoice finance provides the access to a regular steady cash flow.

What are the disadvantages of single invoice finance - if any?

If you're in an industry sector that often has disputed invoices, queries or perhaps part-payments then single Invoice discounting is probably best avoided.  Single invoice finance can be expensive which could mean reduction in your profit margin however there are more factoring companies and spot factoring market places available so rates are slowly getting more competitive.

As previously mention the facility won't work if the debtor deemed to be of a poor quality and has a bad credit rating.

Single Invoice Factoring Summary

A single invoice finance facility can be used for a one off invoice and can be utilised as little or as often as required.  In the main, there's no on going fee, just standard charges and only when you decide to factor your invoices.  With some spot factoring companies there could be a one-off set-up fee.

The advantages of this kind of funding are probably obvious especially for businesses that don't want to be tied to a full factoring scheme.   Of course if your business finds itself using the single invoice factoring funding with increasing regularity then it's probable that you'll then switch to a standard factoring facility.

Imagine having no cash flow restrictions constraining your business growth.

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Download Buyers Guide To Single Invoice Finance (Spot Factoring)

Single Invoice Discounting or Spot Invoice Finance

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