Invoice Factoring allows you to convert your unpaid customer invoices to immediate cash advances.
What is Invoice Factoring?
Invoice factoring, also known as accounts receivable factoring, is a form of small business financing where a business sells its invoices to a factoring company in exchange for upfront funding. When the invoice amount is paid by the customer, the remaining balance is paid to the business owner minus a fee.
Invoice factoring allows you to receive the working capital you need to maintain operations and plan for the future, but without taking on the periodic fixed payments associated with a term loan. If slow-paying clients are stalling your ability to pay bills or meet payroll, invest in technology and equipment or hire more staffing, invoice factoring can help you bolster cash flow by liquidating your outstanding accounts receivable to meet your business needs.
Fast Financing For Your Business
After submitting your invoices to the lender for invoice financing, you’ll receive the amount of the invoice minus a percentage as payment. Once the client pays you, you satisfy the agreement with the lender. While it may be helpful to have the lender collect unpaid invoices on your behalf, understand that you will have less control over the collections process and that your clients may become aware of your cash flow shortages.
Small business owners sell outstanding invoices to a factoring service (the factor) at a discounted rate. The factor advances a lump sum up to 95% of the value of the invoice.
The factoring service then proceeds to collect all payments directly from the clients of the small business.
The factoring service sends the remaining balance to the business, minus any fees, which is typically an agreed-upon percentage.