It\u2019s common for businesses that rely on accounts receivables to run into cash flow problems. Invoices often aren\u2019t due for 30-90 days, potentially leaving you without the capital you need to take on new work.<\/p>
Factoring is one way to keep your company\u2019s cash flowing, relying on your accounts receivables to qualify for an advance of what customers owe you. This short-term financing may be especially helpful if you\u2019re not able to qualify for traditional business loans.<\/p>
Invoice factoring is a type of business financing in which a business sells their unpaid invoices to a factoring company at a discount. The company typically gives businesses between 75% and 90% upfront and then the rest of the funds after your clients pay up \u2014 with a fee subtracted.<\/p>
Businesses can use their funds for any legitimate purpose like working capital. It can be expensive, so you might want to consider less costly financing like equipment loans if they\u2019re available to your business.<\/p>