is selling the interest in your accounts receivables or
invoices to a factor at a small discount. Sometimes factoring
is called "accounts receivables financing".
provides over 100 billion dollars to industry each year.
In fact, it is an old financial service used by multi-billion
dollar corporations that is now available to smaller sized
businesses to which banks are reluctant to lend funds.
Factoring is filling a tremendous void that banks have
Basically, a company sells its accounts receivables (invoices),
representing money due from its customers to a factoring
company, at a discount from face value so that
it does not have to wait the normal 30-45 days for its
accounts receivables to be paid. In short, factoring helps
a company speed up its cash flow, thereby enabling it
to more readily pay its current obligations and grow.
The factoring qualify is easy since only invoices are
needed to sell.
Many new and growing companies have trouble obtaining
traditional bank financing due to their length of time
in business, profitability or financial strength. Factoring
allows these companies to convert their accounts receivables
into instant cash. Once you have delivered your product
or service and generated an approved invoice, you can
get your money in as little as 24 hrs. Factoring can help
a company stay current with its vendors and other financial
obligations such as payroll and taxes.
Other types of financing generally require two years in
business and showing a profit. Factoring does not have
this limitation. Young, growing companies or those with
tax liens and even bankruptcy can still qualify for accounts
receivables purchasing lines.