June 17, 2024

Bench Rest Bags

Designing Homes With Heart

Benefits of Factoring Over an Overdraft

There is a cost associated with using either factoring or a traditional overdraft and they differ between the two products. However, there are also cost savings that can be made by using these products and we have produced a useful calculator in spreadsheet format that allows you to Compare Factoring with Overdraft lending.

The Differences between Factoring & Overdraft

You can update the calculator with your own values but it is already populated with an example that reflects a typical business.

In our example you will see that whilst the cost of factoring is higher than the cost of using an overdraft, the overdraft does not release as many benefits. The potential savings from using an outsourced credit control function through factoring are not achieved by using overdraft. In our example, whilst overdraft results in a net cost to the business, factoring results in a net saving of over £10,000 each year.

Similarly, our example shows that the average business is likely to raise more cash through factoring than through overdraft. Even if this benefit is assumed to be equal, the factoring product still delivers a net saving in excess of £9,000 each year.

Free Overdraft Comparison Calculator

Have a look at our Factoring Comparison with Overdraft Calculator to see the details of our example and to adjust the figures to reflect your business and find out how much you could save.

You will see the benefits and costs of factoring compare with the benefits and costs of using traditional overdraft lending from a bank.