Spot Factoring

Understand how spot factoring works and whether it's the right finance solution for your business.

Boost your cash flow with spot factoring

We compare all factoring options for you, so you can rest assured you'll get the right product and the best deal for your business. Get a quote online or call us on 0808 250 0859 to speak to one of our invoice factoring experts.

Boost your cash flow

What is spot factoring?

Spot factoring is a way for a business to access funds by selling unpaid invoices to a third party, a spot factoring company, on a one off basis in order to receive payment quicker.

The business will agree rates and fees with a spot factoring company and then decide which invoice/invoices it wants to assign to them. The spot factoring company, once the invoice is verified, will advance a proportion of its value, usually around 70-85%, to the business.

The spot factoring company will then chase up the invoice from the client and once paid to them in full will reimburse the business with the outstanding balance minus the agreed fees.

A need to access funds quickly, a new business opportunity, rapid growth or even an unexpected slow period, spot factoring allows access to quick cash with no addition to debt and no tie in to contracts or ongoing fees.

If the business is seasonal with sudden increases in sales and a requirement for increased production costs, spot factoring could be more suitable to its immediate needs

If it is making decisions around extending credit terms to clients, spot factoring will reduce the pressures on cash flow. When there is a need to cover late invoice payments from customers.

Other types of factoring

The needs of SMEs tend to vary according to growth stage and industry. To help you work out which type of factoring will suit your business, here is a brief guide:

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Reverse Factoring

Reverse-factoring is a financing option where a 3rd party financial provider finances the supplier on behalf of the buyer. The process involves the supplier, the buyer and the finance provider .The supplier sells the buyer’s unpaid invoice to the finance provider and receives the cash quickly, the buyer also gets longer to pay for its goods.

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Account Receivable Factoring

Account receivable factoring provides businesses with an option to finance their venture without taking out a loan. This is a type of debtor finance where SMEs sell its invoices to a third party at a discount, in order to provide an immediate cash injection. There are many reasons why a business may factor an invoice, including increasing cash flow and mitigating credit risk.

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Recourse and Non-Recourse Factoring

Recourse factoring is a form of finance where a company sells its invoices to a factoring company. The factor pays the company a percentage of their cash value and then chases up payment of the invoices on behalf of the company. Non-Recourse factoring is a form of finance where a company sells its invoices to a factor and receives a percentage of the cash value from them.

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Debt Factoring

Debt factoring is a finance facility provided by a debt factoring lender to help businesses leverage their acccounts receivable enabling them to instantly inject cash into the business. The debt factoring company pays the business a percentage of the total amount charged to the client and usually takes full responsibility for collecting the payment from the buyer.

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Advantages and disadvantages of spot factoring

Advantages of spot factoring:

Funds are received quickly. As invoices are sold to the spot factoring company, payment is received immediately
There is control over the arrangement. Spot factoring works in a way that allows a company to choose which invoice or invoices to factor. It is then able to raise funds as and when the need arises. If the company’s business is seasonal or there are periods where sales are low, there is no long term commitment to the finance provider and fees are only charged when the service is used.
It is a way of accessing financing when there are no other options available
The invoice is the only security required
There is no additional debt incurred to the company

Disadvantages of spot factoring:

It is expensive; there are cheaper ways to raise finance though they may not be as flexible or accessible
The relationship between supplier and client may be affected as it becomes the finance provider’s responsibility to chase payment of the invoice
Spot factoring works best with large invoices

How does spot factoring work?

1

The business will agree rates and fees with a spot factoring company and then decide which invoice/invoices it wants to assign to them.

2

The spot factoring company, once the invoice is verified, will advance a proportion of its value, usually around 70-85%, to the business.

3

The spot factoring company will then chase up the invoice from the client and once paid to them in full will reimburse the business with the outstanding balance minus the agreed fees.

Why use spot factoring?

A need to access funds quickly, a new business opportunity, rapid growth or even an unexpected slow period, spot factoring allows access to quick cash with no addition to debt and no tie in to contracts or ongoing fees.
If the business is seasonal with sudden increases in sales and a requirement for increased production costs, spot factoring could be more suitable to its immediate needs.

If it is making decisions around extending credit terms to clients, spot factoring will reduce the pressures on cash flow.
When there is a need to cover late payments from customers.

Why choose Novuna as your spot factoring company?

6 month trial period

A 6 month trial period so you can be sure the product is right for you, followed by a 6 month rolling contract – we don’t tie our clients in for long periods.

Digital onboarding

We are the first in the market to offer a digital onboarding process and have been leading the way with our digital capabilities allowing clients to sign up within 24 hours from the first appointment.

Client trust account

Once you become a client you will be given your own trust account, meaning you will get same day availability on your funds. You can also view all of your invoices and payments online at a time suitable to you, 24/7.

No uncleared effects

We have heavily invested in our digital capabilities. This includes the auto allocation of payments using Artificial Intelligence. Ultimately this advance in technology means that our clients access money quicker as well as saving money on interest charges due to auto allocation.

Simple pricing

We aim to make the process of Cash Flow finance as simple and straightforward as possible. Our pricing is very straightforward to understand. For a no obligation quote or an informal chat you can call our friendly team today on 0808 250 0859.

Award winning service

We offer award-winning client services and individual Relationship Managers who are on the other end of the phone or out in the field to visit you in person.