Factoring is a great way to maintain a positive cash flow when building your business. Accounts receivables financing also known as invoice factoring is the practice of selling your invoices at a discount to a factoring company. It is a quick way for small business to raise working capital when needed. The factoring company buys your accounts and advance you up to 90% of the face value of your invoices. They then collect payment from your customers and return the remaining 10% minus there fee after the customer pays in full.

It is a practice used by many small and medium size businesses all over the world and has been around for over a century. There are specialize factoring companies that work in pacific industries and countries. Then there are full service factoring companies that offers a range of financial products and services for businesses in all industries. There are even on-line marketplaces that business owners can auction there invoices themselves to investors. These marketplaces give business owners more control over how low of a discount they are will to give on the invoices.

Companies choose to use factoring because of the fast turnaround time. It usually takes 24 to 48 hours to have the funds they need. There are many more benefits to factoring as well such as minimal paperwork compared to traditional bank loans. Also, unlike a bank loan factoring is based on your customer credit and not your business credit history. One big advantage of factoring is business owners do not have to lose equity in their company to raise money.