What is Factoring?

Factoring, often referred to as invoice factoring, invoice discounting or accounts receivable funding, is a financial service whereby a business sells its outstanding accounts receivable to a financial institution called a factor. The factor buys the invoice at a discount and the seller receives cash immediately. The discount amount is also called the factoring fee. Many factors hold out an additional reserve above the factoring fee until the invoice is paid by the sellers customer, at which point the seller receives the balance of the reserve from the factor.

Factoring is an easy convenient way of accelerating your cash flow and obtaining the working capital your business needs. A large number of businesses with good business models and stable customers fail because they have problems keeping up with the demands on their cash flow. Since banks often times turn away businesses looking for financing because the business is a startup or operates in what the bank considers a risky industry, many small businesses are turning to invoice factors and their unique financing methods to solve their cash flow problems.

If you are a business owner and are struggling with cash flow problems, you should consider factoring your accounts receivable. It can help put your business on a solid financial foundation and enable you to meet your business objectives. So go ahead and give one of our friendly account managers a call and see how Advanced Commercial Capital can help you.

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