Invoice factoring is a financing method where businesses sell their outstanding invoices to a third party, called a factoring company, at a discount in exchange for immediate cash.

Businesses submit their invoices to the factoring company, who advances a large portion of the invoice value. Once the customer pays the invoice, the factoring company sends the remaining balance, minus their fees.

Businesses with cash flow challenges, those with slow-paying customers, or companies that need to fulfill large orders or grow their operations can benefit from invoice factoring.

In recourse factoring, the business is liable if their customer doesn't pay the invoice. In non-recourse factoring, the factoring company bears the risk of non-payment.

Invoice concentration refers to the percentage of your total invoices that are from a single client. If one client represents a high concentration, it could be seen as a risk by factoring companies.

Factoring is used across many industries, including manufacturing, transportation, staffing, wholesale, and many others.

The advance rate usually ranges from 70% to 90% of the invoice value.

Fees may include the factoring fee (a percentage of the invoice), origination fee, service fee, credit protection fee, late payment fees, renewal fees, early termination fees, and potentially others.

The factoring company takes over your accounts receivable and collects payments directly from your customers.

Once the agreement is in place, funding typically occurs within 24 to 48 hours of submitting invoices.

In traditional factoring, the customers are aware as they pay the factoring company directly. In confidential factoring, your customers may not know about the arrangement.

Factoring companies look at your customer's creditworthiness, your invoicing history, invoice concentration, and your industry.

This depends on the agreement with the factoring company. Some may require you to factor all invoices, while others allow selective factoring.

Generally, the invoices themselves serve as the collateral in a factoring agreement.

Yes, because the factoring company focuses more on your customers' creditworthiness than your business's credit score.

Yes, as long as you have invoices from creditworthy customers.

Factoring isn't a loan. It's a purchase of your invoices, so it doesn't create a liability on your balance sheet.

No, with invoice financing, the lender advances you money against your invoices, but you're responsible for collecting payments. In factoring, the factoring company buys the invoices and manages collections.

By providing immediate access to cash tied up in receivables, factoring can help businesses manage cash flow and support growth.

If your business suffers from cash flow issues due to slow-paying customers and you have reliable, creditworthy clients, invoice factoring can be a viable financial tool.