Factoring for quick payment of your invoices

What is factoring?

Factoring is also called debtor financing. Debtors are customers to whom you have delivered and who have received an invoice from you. With factoring, you sell your invoices to a factoring company (the factor). They then immediately pay most of the invoice amount. Usually 80% to 90%. You get that amount in your account immediately and thus get paid quickly.

For whom?

Factoring is useful for companies that need money quickly for daily operations, without having to wait for payment from the customer. Factoring allows you to keep your company's cash flow going.

Three forms of factoring

There are 3 main forms of factoring. American factoring and reverse factoring fit well with zzp' ers and SMEs. Traditional factoring suits larger companies more.

• Traditional factoring
  You pledge your entire file of debtors (your portfolio of debtors) to a factoring company. The value of this portfolio determines how much credit you get. For that credit, you pay a fixed amount or a percentage of turnover. The factoring company would like you to have a diverse group of debtors. Traditional factoring is an alternative to overdraft and flexible credit.
• American factoring
  This form of factoring can be used even if you only have 1 or 2 debtors. You sell the outstanding invoices and get up to 97% of the invoice amounts paid into your account. The factoring company may approach your customers in advance to check whether the service or product has actually been delivered. The factoring company takes over the debtor management from you.
• Reverse factoring (or supply chain finance)
  This form of factoring allows you to get paid earlier. The customer you supply to receives an invoice from you. Your customer has that invoice paid by a factoring company so you get your money faster. The customer later repays the factoring company themself.

Check conditions

Do you want to use factoring? Then a factoring company must first accept you. Each provider has its own requirements. Compare the conditions before making your choice. Most factoring companies look at contract duration, debtor management and credit risk. They also look at your company's turnover and history.

Costs of factoring

With factoring, you only incur costs when you use the product. So per invoice. Factoring costs are 2% to 5% of the invoice amount.

Invoice financing

Similar to factoring is invoice financing. Like factoring, you sell outstanding invoices to a finance company. The difference is that you do take care of collecting these invoices from your buyers yourself. As a result, they do not see that a finance company pays the invoice in advance. Nor do they know that you have financing for this. You remain the trusted point of contact for your business relation.

Help with business financing

The Financing Guide helps you find your way in financing your business. Do you still have questions? Call the helpline on 088 585 11 11, or ask an expert for advice.