Accounts Receivable Factoring

Accounts receivable factoring—also known simply as factoring—is a financial transaction in which a business sells its outstanding invoices (accounts receivable) to a third-party company, known as a factor, at a discount. This allows the business to receive immediate cash instead of waiting 30, 60, or even 90 days for customer payments.

How It Works

  1. Your business issues an invoice to a customer for goods or services.

  2. You sell that invoice to a factoring company for a percentage of its total value (usually 70–90% upfront).

  3. The factor collects payment from your customer.

  4. Once the invoice is paid in full, the factor sends you the remaining balance, minus a fee.

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Why Use Factoring

  • Improves cash flow: You get paid quickly, allowing you to cover payroll, invest in growth, or manage day-to-day expenses.

  • No new debt: Unlike a loan, factoring doesn’t add liabilities to your balance sheet.

  • Flexible financing: Approval is often based on your customers' creditworthiness, not yours.

Is It Right For Your Business?

Factoring can be a smart option for businesses that:

  • Have long payment cycles

  • Struggle with cash flow gaps

  • Are growing quickly and need working capital

  • Want to avoid taking on more debt