02/2023

Factoring speeds up the company’s cash flow

Business operations include many areas related to money, one of which is invoicing. Invoice financing is an accounting method that lets businesses borrow against their accounts receivable to generate cash quickly. With invoice financing, a company uses an invoice or invoices as collateral to get a loan from a financing company

The billing process consists of many small pieces. Invoice financing is an option worth considering, for example, in a situation where, due to a temporary cash shortfall, the company does not have the opportunity to wait for invoice payments to arrive.

Sortter’s invoice financing service enables companies to finance their operations with the help of sales receivables. Applying for invoice financing through Sortter saves time and effort, because with one application you can reach all financing companies that cooperate with us.

What benefits does invoice financing bring?

The invoice financing service offers the company benefits that can be divided into three areas:

• financial benefits
• benefits in terms of time management
• benefits from a customer service point of view.

Financial benefits include, for example, easier forecasting of your company’s cash flow and improved liquidity. Investing your company’s money will also speed up when the capital is not tied up in available for sale. In addition, invoice financing is usually a cheaper option than business loans offered by financial companies.

Thanks to factoring financing, you also save time when administrative work is reduced. In this way, you can focus even better on your company’s operations and leave payment monitoring and debt collection to professionals.

Your customers also benefit from invoice financing, because it allows you to grant them longer payment terms. This improves customer service and often also customer satisfaction.

How does factoring work?

Invoice financing means that your company receives financing against so-called sales receivables. Trade receivables are sales invoices that are not due and are created if you deliver a product or service to your customer before he pays for it. When you send your customer an invoice, you will immediately receive approximately 80% of the invoice amount through the invoice financing service, and the rest after the customer has paid the invoice.

In invoice financing, invoices serve as collateral for financing. The bank or financial company offering invoice financing manages the whole, i.e. registers payments and, if necessary, also sends payment reminders. In this way, your company saves time when taking care of invoices becomes easier.

It is also possible to sell the invoices to a bank or finance company, in which case the payment will be received immediately. 

• When selling invoices, the bank or financial company is responsible for the risk.
• In invoice financing, the risk of credit loss mostly remains with the company itself.

Who is factoring suitable for?

Invoice financing services are suitable for companies of all sizes, regardless of industry. 

• Most often, invoices are financed in industries where payment times are long and the amounts to be invoiced are higher than normal.
• Selling an invoice, on the other hand, is suitable for a situation where the demand for your company’s products or services suddenly drops temporarily. You can sell invoices either individually or several at a time.

Whether it’s an invoice financing service or a business loan, there’s no point in wasting time asking for offers separately from all financing companies: let us compare the offers for you. Sortter provides an objective comparison between different kinds of loans, sorting the best financial deals to our customers in a simple and transparent way.