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What is a CHOCC facility?
CHOCC (which stands for client handles own credit control) is one of the most popular forms of invoice finance for businesses in the UK.
It operates as a hybrid of invoice factoring and invoice discounting, which, as the name suggests, allows credit control to remain with your business.
How does CHOCC differ from invoice discounting?
While both discounting and CHOCC allow you to retain credit control in-house, a CHOCC facility is fully disclosed to your customer.
This makes the product perfect for those businesses that would like to maintain credit control, but don’t require the confidentiality offered by a confidential invoice discounting facility.
How does CHOCC work?
A CHOCC facility works in the following way:
- An invoice is raised to your customer – You raise an invoice to your customer and give a copy to your finance provider.
- You receive payment from your invoice finance provider – Receive up to 90% of the invoiced amount instantly from your funding provider.
- The invoice is settled and you receive the balance – Minus any charges due for the credit facility.
Keep reading – Accounts receivable factoring or CHOCS.
What are the advantages and disadvantages?
Like any financial product, there are some key advantages and disadvantages to consider.
The key advantages are:
- Improved cash flow – CHOCC facilities afford you much improved cashflow and allow you to grow your business without your bank balance holding you back.
- You retain credit control – Credit control remains with your business, meaning you can manage your customer relationships effectively. This can deepen your customer relationship.
- Constant finance – Invoice finance is a form of revolving credit that can react to the ebbs and flows of your business. If you grow, your finance facility can grow too. In quieter periods, the amount borrowed will reduce, shrinking your finance costs.
The key disadvantages are:
- Some customers may not be approved – If some of your customers have a poor credit history, you may find that they can’t be accepted for funding.
- Notice of assignment – As with an invoice factoring facility, your business must include the notice of assignment at the bottom of your invoices, alerting your customers to the existence of the facility.
- Cost – while CHOCC is a relatively low cost way to borrow money, there is a still a cost to consider.
How much does it cost?
A CHOCC facility is generally cheaper than a debt factoring facility as the lender saves money by not offering credit control.
The actual cost will vary depending on the provider chosen, your turnover, industry and the strength of your customers.
The easiest way to compare costs is through our online invoice comparison tool, which allows you to compare offers quickly, as lenders compete for your business.
Will my business be eligible?
If you operate B2B and accept payment on delayed payment terms of 30 days or more, there is a great chance that you’ll qualify.
These facilities are popular with businesses in different sectors, including manufacturing, recruitment and can even be used by startups.
Read more – recruitment invoice finance, invoice finance for manufacturers or invoice finance for start-ups.
What is the best way to secure a CHOCC facility for my business?
The best way to secure a CHOCC facility for your business is through the ABC Finance invoice finance comparison tool.
It switches the process around. Instead of contacting lenders and negotiating, lenders will compete for your business by offering their best offer to you through the platform, without the need for endless phone calls.
Once you’ve settled on the perfect deal for you, you can share your contact details with them through the platform and secure your finance.
Of course, while we’ve taken the process online, we still have a team of experts on hand to help you, should you need any help in choosing between different offers.
