🧾 Receivables / Invoice Factoring

What is Invoice Factoring?

Receivables factoring is when a business sells its unpaid invoices (accounts receivable) to a third-party financial company (a factor) at a discount in exchange for immediate cash. The factor company advances a large percentage of the invoice value, then collects the full amount directly from your customer, and remits the remainder to you.

How It Works

1. Sell Goods/Services: You sell products or services on credit, creating an invoice with future payment terms (30, 60, or 90 days).
2. Sell Invoice: You sell this invoice to a factor for immediate cash — typically 80–95% of the face value.
3. Factor Advances Cash: The factor pays you the agreed-upon advance amount immediately.
4. Collection: The factor collects the full invoice amount directly from your customer.
5. Reserve Release: The factor remits the remaining balance (minus fees and interest) to you.

Key Benefits

• Immediate Cash Flow: Converts slow receivables into quick cash
• No New Debt: Provides working capital without taking on loans
• Credit Management: Factors handle customer credit checks and collections
• Scalability: Supports rapid growth by funding operations

Types of Factoring

• With Recourse: Your business retains the risk of uncollectible invoices.
• Without Recourse: The factor assumes the credit risk, protecting you from bad debt losses.

Best For

Manufacturing, transportation, staffing, and healthcare industries that often deal with long customer payment cycles. Also great for companies needing to bridge gaps in working capital.

Will not affect your business or personal credit score