Invoice factoring
Invoice factoring is the sale of your unpaid B2B invoices to a factoring company at a discount, giving you most of the cash now instead of waiting on net terms.
Factoring turns a receivable you already hold into cash. You sell eligible invoices to a factor, receive an advance up front (often 80 to 90 percent of face value), and get the remainder, minus the factoring fee, once your customer pays. It is a true sale of receivables, not new debt on your books.
Because the factor collects from your customer, approval leans more on your customers' credit than on your own. Factoring can be recourse, where you cover invoices that go unpaid, or non-recourse, where the factor absorbs certain defaults for a higher fee.
Common questions
Is invoice factoring a loan?
No. It is the sale of your invoices to a factor, so you get cash without taking on new debt.
How much of the invoice do you get up front?
Advance rates commonly run 80 to 90 percent of the invoice value, with the rest paid after your customer settles, minus the factoring fee.
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