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How to Use Selective Factoring

If you’re looking into factoring services but can’t decide which to opt for, then investigating everything that’s available is essential. Selective factoring is one such option, giving you the option to choose which of your invoices you want to factor. But how does this invoice finance option work, and how can it help?

How does selective factoring work?

Essentially, selective factoring is factoring with a bit more flexibility built in. Instead of factoring a chunk of your invoices, you can choose which specific ones you want to factor. This is a relatively new development for invoice finance, which itself has been around a long time. You can choose those invoices which will most efficiently release cash flow to your business, helping you to get a more flexible funding solution.

First, you need to agree with your factoring lender which invoices you are going to factor, after which the lender will perform a credit check on the selected customer. Once you’ve sent out your invoices to the customer, the lender can then advance up to 90% of the invoice’s value to you, normally within 24 hours. Your factoring lender will then chase up all payments professionally, with customers being aware that you’re using a factoring lender just as with conventional factoring services. Once customers have paid off their balance, you’ll receive the remaining 10% of the funds, minus a small lending fee.

What are the benefits of selective factoring?

Selective factoring means you can borrow money and release cash flow on an ad hoc basis without committing to an ongoing programme of factoring. You can increase turnover in your peak seasons when needed, and then scale back factoring when you’re less in need of extra cash flow.

Choosing which invoices to factor lets you choose either those with large values or those customers who often take a long time to pay. You could even factor invoices which are from overseas exports. This is often a cost effective way of increasing cash flow when needed, especially when compared with overdrafts and credit cards.

 

 

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