These days, raising capital for a project can be quite tricky. Increasingly, firms are being turned down for loans by traditional financial institutions like banks and building societies. This has led many firms to turn to alternative financial products, and most have been pleasantly surprised by the ease with which they can use Scottish factoring to raise the capital that they need to fund projects and deal with cashflow issues.
Factoring is an accessible form of borrowing
The way factoring works is simple. When firms complete an order or task, they raise an invoice for each customer and wait for payment. In most cases, they wait at least a month and often have to wait longer. With factoring, it is possible for a firm to take that invoice to a Scottish factoring specialist and ask to borrow money using the invoice as a form of collateral. It is possible for firms to borrow up to 90% of the value of each invoice. This means that if their customer owes them £1,200, they can borrow up to £1,080 against that particular invoice.
Invoice factoring is an accessible form of borrowing. Virtually every business raises invoices, and all of them can be used as security for a short-term loan. When payment is received, the loan and any fees are paid.
Factoring is a flexible way of borrowing money
The fact a company can choose to borrow against just one or two or all of their invoices makes this an extremely flexible way of borrowing money. However, this financial product is primarily designed to help firms deal with peaks and troughs in sales. One month, a firm may borrow nothing this way, while the next it may borrow against 20% of its invoices to ensure that it has enough cash to pay the wages.
Asset financing may be a better way to raise capital
Factoring can be used to raise capital, but many firms prefer using asset financing for this. Companies can use anything valuable that they own as collateral for this kind of loan. This includes property, raw materials, and finished products as well as machinery and plant. These loans are more long-term than factoring loans. A company does not have to arrange new financing month by month. For long-term projects, this is far easier. However, that does not mean that factoring cannot be used to raise capital for projects; it can, and many firms do exactly that.
If you are looking for a Scottish factoring firm that also offers its clients the chance to borrow against their invoices, speak to us at Invoice Finance Scotland. We offer access to a range of lending products, including invoice factoring, asset finance, and specialist products such as construction finance. Our experienced team is ready and waiting to help you to raise the capital your company needs to expand, so please give us a call or contact us online for a quote. We will quickly determine which financial products are best and discuss your options with you.