Running a business often means waiting for payments. You've done the work and sent the invoice, but cash can take 30, 60, or even 90 days to arrive. This delay can strain your finances, making it hard to cover payroll, buy supplies, or seize new opportunities.
Invoice factoring offers a solution. It's a financial tool where you sell your unpaid invoices to a third-party company, called a factor, at a small discount. In return, you receive most of the invoice value—typically 80% to 95%—almost immediately. This isn't a loan, so you don't take on new debt. Instead, you're unlocking cash from an asset you already own.
The process is simple:
- Do the work and invoice your client.
- Sell the invoice to a factoring company.
- Get a cash advance within a day or two.
- Settle up after your client pays the factor. The factor sends you the remaining balance, minus their fee.
This strategy is especially useful for industries with long payment cycles, like trucking, construction, and staffing. The factoring company focuses on your customer's creditworthiness, not yours, making it accessible for startups and growing businesses that may not qualify for traditional bank loans. By converting your invoices into immediate cash, you gain the financial flexibility to manage expenses and fuel growth without the stress of waiting for payments. It’s a powerful way to ensure a steady, predictable cash flow.