Invoice factoring is an alternative form of small business funding. Factoring enables business owners to sell their outstanding invoices in exchange for a cash advance. The process is fast and easy and can provide working capital to businesses in need. First, you provide goods and/or services to clients as usual.
Once the service or product delivery is complete, you send the invoice to a factoring company. The factor will verify the invoice, issue a cash advance (usually within 24 hours), and ultimately collect payment from your customer. Generally a small fee is charged for utilizing factoring services. Invoice factoring is often confused with collection agency groups and/or pay-day loans, however it’s neither.
Invoice factoring is the actual sale of assets (invoices) to help free up funds. Businesses of all sizes and stages rely on invoice factoring to maintain a steady cash flow and cover expenses.