What Does Factoring Mean?
Factoring is a financial service that enables businesses to receive immediate cash by selling their unpaid invoices to a third-party company, known as a factoring company. This process, also called invoice factoring, allows companies to improve cash flow by accessing funds tied up in outstanding invoices, without waiting for customers to pay.
How Factoring Works
Here’s a breakdown of how factoring typically works:
- Submit Invoices – A business sells its unpaid invoices to a factoring company.
- Receive an Advance – The factoring company advances a portion of the invoice amount, usually between 70-90%.
- Customer Payment – The factoring company collects payment from the customer when the invoice becomes due.
- Remaining Balance Released – Once the invoice is paid, the remaining balance is given to the business, minus a small factoring fee.
Key Benefits of Factoring
Factoring can be highly beneficial for businesses that need immediate access to cash for operational expenses, payroll, or growth investments:
- Immediate cash flow without taking on debt.
- Reduces payment waiting times for businesses with long billing cycles.
- Enables growth by providing funds to meet operational and expansion needs.
- Flexible financing option based on sales volume rather than credit score.
Frequently Asked Questions (FAQ)
Is factoring the same as a loan?
No, factoring is not a loan. It involves selling an asset (invoices) rather than borrowing, meaning there is no debt added to your balance sheet.
Who typically uses factoring?
Factoring is popular among businesses with long payment terms, such as those in manufacturing, logistics, and professional services, who benefit from improved cash flow.
How much does factoring cost?
The cost varies but typically includes a small fee deducted from the total invoice value once it’s paid by the customer.
Why Choose Factor & Fund for Factoring Services?
At Factor & Fund, we offer reliable, efficient, and transparent factoring solutions tailored to meet the unique needs of each business. With our experienced team and streamlined process, we help you unlock funds from unpaid invoices quickly and without hassle.
Interested in Learning More?
Contact us today to explore how Factor & Fund can support your business with flexible factoring options.