Factor Company
What is a Factor Company and How Can It Help Your Business?
A factor company provides invoice finance, allowing businesses to access fast cash by advancing funds against outstanding invoices. This solution helps improve cashflow, manage late payments, and support business growth — especially for UK SMEs.
In this guide, we explain how factor companies work, the services they provide, and how to find the right one for your business.
What Does a Factor Company Do?
A factor company (also known as a factoring company) purchases your unpaid invoices and provides you with a cash advance — usually between 80% and 90% of the invoice value.
Once your customer pays the invoice, the factor company sends you the remaining balance (minus their fees).
Services typically offered by a factor company include:
- Immediate cash advances on unpaid invoices
- Credit control and customer payment chasing
- Full sales ledger management
- Detailed reporting and account management
How Factor Companies Support UK Businesses
Cashflow issues are one of the biggest challenges for UK SMEs. A factor company offers a fast and flexible solution that helps you:
- Avoid long payment terms
- Pay suppliers and staff on time
- Take on new contracts with confidence
- Avoid overdrafts or high-interest loans
Types of Factoring Offered by Factor Companies
There are several types of factoring services in the UK:
- Disclosed Factoring – Your customers know a factor company is involved
- Confidential Factoring – Customers are unaware of third-party involvement
- Recourse Factoring – You retain the risk if the customer doesn’t pay
- Non-Recourse Factoring – The factor company takes on the credit risk
Typical Costs of Using a Factor Company
Costs generally include:
- Service Fee – Typically 0.75% to 2.5% of invoice value
- Discount Fee – Interest charged on the advanced amount, usually 2–5% over base rate
Other potential charges include setup fees, minimum usage fees, and audit costs. Using a broker can help you compare offers and avoid overpaying.
How to Choose the Right Factor Company
Choosing the right provider depends on your business size, sector, and specific needs. Key factors to consider include:
- Reputation and membership of any trade organisations
- Flexibility of contracts
- Industry experience (e.g. construction, recruitment, logistics)
- Customer service quality
- Cost transparency
Use a Broker to Compare UK Factor Companies
At FactoringBroker.co.uk, we work with a panel of trusted UK factor companies to help you:
- Get matched with suitable providers
- Understand the pros and cons of each offer
- Negotiate competitive rates
- Save time and avoid poor contracts
Whether you’re new to factoring or looking to switch providers, our team can guide you through the process — all at no cost to your business.
FAQs About Factor Companies
How many Factor companies are in the UK?
The number of Factor (Factoring) companies in the UK is ever growing as the market expands and more UK businesses realise it’s value in being a source of finance that grows as your business grows, – unlike a static overdraft
Which is the best Factor company?
This will depend on several variables, which is why it is essential to use the free services of factoringbroker.co.uk – we have years of industry experience and can help you find a good fit for your business.
Is there a difference between a Factor Company and a Factoring Company?
No, the terms are interchangeable.
Get Started with a Factor Company (Factoring Company)
Looking for a reliable UK factor company to improve your business cashflow?
Get a Free Quote or call 01554 562563 today.