Invoice factoring

[SallyB]

If a company has a reached the limit of a �25,000 overdraft, has a �12,000-�15,000 purchase ledger and a �30,000 sales ledger, and most invoices being paid within or just after 30days - would invoice factoring help the cash flow? and would it be difficult to get out of, if the business is less busy in the future?

[Squitty]

Factoring companies dont usually look at your purchase ledger. They give you a percentage of the invoice value (70-85%). They will usually only pay out on invoices made out to low risk companies so it depends on who your customers are.
There will also be some kind of service charge (usually 6% or thereabouts). Recruitment companies use this feature a lot for cashflow reasons & they find it very hard to get back out of it.
Cake & eat it always comes to mind for factoring companies.

[sandmaster]

I would have thought your ledger values are too low to consider factoring. When taking on clients the factoring companies will assess your credit worthiness. They also assess the credit worthiness of the companies whose debts they accept for factoring and place a limit on them. So for instance, if you were owed money by a large multi national, the factoring company would check its books to see how much it has already paid to other clients against that company's debts, and if its limit has been reached it will not advance any more to you.
Sorry this is a convoluted answer but I hope it makes sense.
PS As squitty says the factoring company will charge you for the service - so try to avoid it if possible.

[Maypole]

If you have lots of smaller invoices then it will probably be of less help than having large invoices that can make your cash flow very lumpy. Bear in mind that if you have a lot of invoices to one company they will not absorb the total volume of any one client which will be limited to c75-80%.

But factoring can be useful in making cashflow a bit smoother and some debtors pay quicker if the invoice has come from, say, a Bank.
When I looked at it via HSBC they wouldnt touch the consultancy work we did (which happened to be 75% turnover) and would only cover the product sales which they saw as more recoverable and less contentious.

[propQ20409]

Have you looked at PAID from The Credit Protection Association, they offer a credit management system designed to get you paid faster, completely in your control, unlike other out sourced services. Includes credit checking, legal letters, and debt purchase if necessary, so you don't lose money off your bottom line. Have a look at www.cpa.co.uk, perhaps it might work for you.