Everything you need to know to compare a factoring deal with MarketInvoice's unique product.

1. Contents
What is factoring? .........................................................1
Why would a business use factoring?...........................2
Who uses factoring? .....................................................4
What are the costs of factoring? ...................................5
Factoring- Frequently Asked Questions (FAQs) ...........7
In conclusion.................................................................8

2. The Ultimate Guide to Invoice Factoring
Here at MarketInvoice we often get asked the question:
“Isn’t what you guys do basically factoring?”
Well, no- we’re not a factoring company. We’re a much better way of doing invoice finance,
without contracts, debentures, personal guarantees or hidden fees.
Factoring is much more old-school. It’s been around for millennia, having been used 4000 years
ago by the ancient Mesopotamians. Yet it’s still a widely misunderstood product, and one that
several banks have been accused of mis-selling.
So, to shed some light on this product the MarketInvoice team have put their heads together to
provide you with this- The Ultimate Guide to Invoice Factoring.
What is factoring?
Factoring is a form of invoice finance, where businesses sell their entire accounts receivable book
to a finance provider.
Businesses use factoring to get a cash advance on their unpaid sales
invoices (typically between 60-95%) as soon as they are raised.
Using factoring means that they don’t need to wait for the customer to
pay, which can take between 30-120 days. The factoring company
takes over the credit control for all invoices and, when payment is
made, pays the business the balance on the sold invoice, minus any
fees.
Factoring is not a type of loan- clients are simply using it to get
access to cash they’re already due, rather than additional capital.

3. The Ultimate Guide to Invoice Factoring
Why would a business use factoring?
If you’re a business that sells to other businesses, it’s likely that you’ll recognise the need for
invoice finance.
B2B sales come with a caveat. When a project or contract is agreed, the supplier will send their
new customer an invoice for payment when the services or products have been delivered. So far,
so good. But that invoice can often have much longer payment terms, meaning the customer
doesn’t need to pay on delivery. Average payment terms range from 30-60 days in the UK.

4. The Ultimate Guide to Invoice Factoring
Inevitably, this process leads to cash flow issues for the supplier, who - don’t forget - stumps up
cash for the goods and services that have long since been delivered without seeing a penny for
months.
It’s a situation that’s worse for the suppliers of large corporate businesses like the supermarkets or
department stores.
Many of these corporates have payment terms as long as 120 days- imagine how crippling waiting
three months for payment could be to a small business like a farm or a bakery. Not only have they
already paid for their goods to be delivered, they’re also having to fund production and delivery of
other orders in the meantime. It’s a vicious circle.
That’s where MarketInvoice or other invoice finance providers can come in to help.
Invoice finance gives those suppliers a big chunk of the funds due to them upfront, so they don’t
have to wait months for payment.

5. The Ultimate Guide to Invoice Factoring
Who uses factoring?
According to the Asset Based Finance Association, the industry body, the top six sectors that use
invoice finance are:
 Distribution and logistics
 Services, such as media, recruitment or consultancy
 Manufacturing
 Transport
 Retail and wholesale
 Construction
According to ABFA’s latest figures, the vast majority of the 43,000 businesses that use invoice
finance have a turnover of under £5m. 276 businesses with a turnover of over £100m also used
invoice finance to help with cash flow.
The reality is that a huge variety of businesses can use invoice finance products like
MarketInvoice or factoring to accelerate the payment of invoices. If your business is suffering
because you have to wait for invoices to be paid, there’s more than likely a service out there to
suit.

6. The Ultimate Guide to Invoice Factoring
What are the costs of factoring?
Factoring providers have earned themselves a less-than-perfect reputation for costs and hidden
fees.
Rates vary massively depending on a number of factors, including provider, business size, debtor
book quality and length of contract. The initial difficulty when comparing invoice finance options is
that each provider tends to quote on different terms, using different names for each of the fees
involved.
Here’s a bit of a glossary, to help if you’re looking at factoring vs. MarketInvoice:
Service Charge
A percentage of each invoice that the factoring company takes as a fee, usually subject to a
monthly minimum threshold that varies between providers.
Discount Rate
An annual rate applied to all funds advanced under the facility. It’s not technically interest,
but works in the same way- check the rate before you sign the contract.
Administration Fee
A one-off setup fee charged to implement the facility.
Legal Fees
Some factoring companies charge fees for legal advice, or security fees to put a charge in
place over the business.
Re-factoring charges
If invoices remain unpaid after a certain amount of time some factoring companies will
charge an additional fee.

7. The Ultimate Guide to Invoice Factoring
Same day advance fee
If you need money advanced on the same day there may be an additional fee.
Termination Fee
If your business decides to leave the factoring facility before the contract’s ended you will
most likely need to pay a termination fee.
Compared to factoring, MarketInvoice’s fees are simple and transparent. We don’t charge a whole
ream of complicated fees- if you use us, you’ll see the cost of finance upfront.
Unlike factoring, MarketInvoice doesn’t require your business to sign up to a long contract. You
can sell invoices one at a time online, as and when you need the finance.
We charge two fees:
MarketInvoice processing fee
This fee is our equivalent to a ‘service charge’. It’s a one-off cost as a percentage of the
invoice that you’re selling- the average processing fee on our platform is 1%.
Investor fee
This fee goes to the investors that buy out your invoice, and again is a percentage of the
invoice that you sell. However, this fee applies every 30 days that the invoice is
outstanding. The average investor fee on our platform is 1.5-2%.
Because ours is a pay-as-you-go service there are no termination
fees, legal costs or setup fees.
If you’d like to compare a factoring quote against a bespoke
MarketInvoice quote, and we can helpget in touch with our team
you understand the costs involved.

8. The Ultimate Guide to Invoice Factoring
Factoring- Frequently Asked Questions (FAQs)
Most factoring companies will, as part of their service, take on your credit control and chase your
customers for payment on your behalf. That’s because their priority is getting paid as quickly as
possible, and they don’t want to risk a delay by leaving it to you.
What many businesses dislike about this approach is that they lose control of a key part of their
precious customer relationships. If their customer gets chased for payment too heavily it might
make them think twice about doing business with you again.
With MarketInvoice you’re still in control of your client relationships- we don’t take on your credit
control.
Factoring can be associated with distressed businesses since it’s a form of finance that’s more
readily available if a business has a poor credit history. Some factoring companies have even
been linked to insolvencies, since their hidden fees and termination fees can force otherwise
solvent clients out of business.
However, many businesses that use invoice finance and MarketInvoice’s service are exactly the
opposite of distressed- they’re successful and growing fast. Growing companies can have real
problems with cash flow, and invoice finance can provide the flexibility that’s needed.
Do factoring companies need to take on my credit
control?
I’ve heard that businesses who use factoring are
normally in trouble- is it a sign of distress?

9. The Ultimate Guide to Invoice Factoring
Factoring costs can vary massively, and some providers are more expensive than others. Do a
straight comparison with bank loan costs and invoice finance can be fairly competitive.
MarketInvoice’s costs are described upfront before every invoice is sold. What’s more, our clients
enjoy lower charges after trading more invoices on our platform, so the cost of finance gets
cheaper.
Isn’t factoring really expensive?

10. The Ultimate Guide to Invoice Factoring
MarketInvoice vs. Factoring
Factoring
 Transparency
See exactly what you’ll
pay before selling an
invoice
 Typically involves a long list of hidden fees- read
the contract carefully before signing
 Flexibility
Use us selectively, only
as and when you need to
 Factoring locks you into a contract which can be
as long as 3 years, with termination fees if you
want to leave early
 Speed
Register, sell invoices
and receive funding in 24
hours
 Factoring facilities take days or weeks to set up
since the provider needs to assess the entire
debtor book
 Funding
Certainty
100% of invoices are
funded in full, often
instantly
 Invoices are always funded, although the funds
can often take days to arrive in your account
 Stress-free
No debentures, no
personal guarantees, no
lock-ins
 Typically factoring contracts involve debentures or
personal guarantees, or both.
We hope you’ve found our Ultimate Guide to Factoring useful. Now you know why we think it’s
important to tell people that MarketInvoice isn’t a factoring company- although we provide invoice
finance, we’re very different.
If you’re currently looking at factoring vs. MarketInvoice, we can help you compare the costs
involved and talk you through any quotes you’ve received.
Contact our team for more information >>>

11. The Ultimate Guide to Invoice Factoring