What is Invoice Factoring?

Invoice factoring is a financing arrangement in which a business sells its unpaid invoices to a factoring company at a discount. The factor advances a large share of the invoice value right away, collects payment from the customer, and then releases the remainder minus its fee. Approval depends heavily on the creditworthiness of your customers. Factoring is mainly used by businesses that invoice other businesses or government agencies on payment terms.

Example

A trucking company factors its load invoices to get paid within days instead of waiting 45 days for brokers to pay.

Related funding

Invoice Factoring: Turn slow-paying invoices into cash now.

Related terms

HELOC (Home Equity Line of Credit)Lien PositionLLC (Limited Liability Company)All terms