2 min read
Definition
Invoice factoring is a form of invoice finance where a business sells its unpaid invoices to a factor, which advances most of the value immediately and takes over collecting the debt from the customer. It releases cash tied up in the sales ledger and outsources credit control.
In plain terms
You raise an invoice, the factor advances say 85% straight away, then collects from your customer and pays you the balance less its fee when they settle. Unlike discounting, the customer usually knows the factor is involved.
Why it matters
Factoring suits businesses that want cash fast and would value handing over collections. See invoice discounting and the invoice finance guide.
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