Which type of invoice factoring is right for you?

Invoice factoring is a simple and efficient way to enhance your revenue, but do you know what type will best suit your business?

Invoice factoring is a type of debtor financing that’s used to ease a business’ cash flow. If you can’t wait for a debtor to pay an invoice, you can settle the invoice ahead of time in exchange for a percentage of the invoice. This is referred to as invoice factoring.

This can be a convenient option to consider for your business, but there are three types of invoice factoring available and it’s important to understand the differences between them. These types are broken down in this guide.

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Rates last updated December 12th, 2018
Name Product Min Loan Amount Max. Loan Amount Loan Term Application Fee Product Description
Waddle Invoice Finance
10+ years
An innovative finance solution to support your cash flow and get your invoices paid. Loans are tailored to your business.

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This is a popular choice for companies that are expanding and want a long-term solution for their invoice factoring. Factoring companies will likely want to work with you on a 12-month basis and can offer low rates and fees in return. The quantity and consistency of invoices ensure companies will be able to provide your business with as much as 90% of your turnover, with the rest eventually paid by the debtor.

  • All-of-turnover invoice factoring includes low rates, with you paying a small fraction of the income achieved through the invoice itself.
  • Many invoice factoring companies will monitor the credit of your debtors and help with collections, if necessary.
  • This type of invoice factoring offers the least flexibility, as all invoices are financed in the order that they are received.

Partial ledger

Partial ledger factoring is also appealing to growing businesses; it allows for companies to account for a number of factors that can affect income. These include the time it takes individual debtors to pay invoices, peaks in trading and unique agreements with specific customers. These features makes this brand of invoice factoring a sound option for small business directors who deal with a diverse array of clients and customers.

  • An extremely flexible format that allows directors to capitalise on profitable customers while leaving out invoices they expect to be paid quickly.
  • Partial ledger can’t compete with the low rates offered by all-of-turnover factoring and doesn’t allow for the same hands-off approach.

Spot factoring

If your company needs income quickly, possibly to cover a one-time payment or meet the monthly payroll, you might consider spot or single factoring. This is for when you’re looking to access the funds from one invoice or a single load as quickly as possible.

However, keep in mind that the speed that this type of invoice factoring is carried out is reflected in the costs, which are the highest out of the three types. The short period makes this work far less financially effective for the factoring company, who may charge you weekly or even monthly for just a few hours’ work.

  • This is one of the most secure, risk-free ways to secure cash for your company in a short space of time.
  • As an application fee and service charge apply, along with rates of as high as 12%, this makes spot factoring an expensive means of bringing in revenue.

The type of invoice factoring you choose will be affected by the size of your company, your relationship with customers and the quantity of invoices you receive. Invoice factoring offers efficiency and value that other money lending services don’t and by choosing the one that best fits your business, you can capitalise on this to the fullest extent.

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