Invoice Trading

In a word, yes. And it can be a fantastic option for businesses that are looking to raise funds quickly without having to provide security other than the value of the invoice or enter into a loan. Single invoice factoring, more commonly known as spot factoring, involves the sale of a single invoice to a third party at a discounted rate.

In a spot factoring agreement, as the invoice is effectively ‘sold’, there is no ongoing contract and no lengthy loan application process to go through. Instead, once the agreement is set up, the business is able to access an average of 85 percent of an invoices’ value within 24 hours of it being issued. It then receives the balance of the invoice, minus the factoring provider’s fee, when the invoice is paid by the customer.

What are the benefits of factoring individual invoices?  

Spot factoring is gaining popularity in the UK as businesses increasingly look for short-term finance solutions they can use in the event of a temporary cash flow ‘hiccup’. One of the advantages of factoring a single invoice rather than your whole debtor book is that once the invoice has been paid, you have no contractual obligation. You can then choose to revisit the facility if you need to and dip in and out as you please.   

Typically, businesses choose to factor a large invoice to give them a cash-flow injection to pay suppliers on time, pay their staff or inject cash into a new project, office or product. However, there are also disadvantages associated with this one-off factoring approach.

What are the downsides?

Of course, with any finance option there also downsides to consider. Companies that want to factor a single invoice will tend to pay more for the flexibility this type of agreement provides. This is due to the fact that the fees associated with providing the service, such as credit checking the customer and collecting the payment, are not spread across multiple invoices.   

It can also take longer to set up the agreement in the first instance. This can mean that companies have to wait up to a week to access the funds they need. Then there’s the fact that some spot factoring providers insist on taking over the credit control process and chasing the end payment. This can be a sticking point for companies that want to maintain friendly relations with their customers and do not want to them to know they are using a factoring company.  

Get a quote

If you think spot invoice factoring could be a potential solution to your temporary cash flow shortage, you can compare invoice finance providers today to find the UK’s best deals. Alternatively, if you’d like to discuss spot factoring with an expert, please call 08000 24 24 51 for free, impartial advice.