Invoice Factoring

Invoice​ Factoring

Factoring occurs when a company with an outstanding and unpaid invoices, is going   through cash flow problems and sells its account receivables to the factor, for 70% to 95% of its value. The factor will then take over collecting payment from customers. It will also charge a fee ranging from 1.5% to above 3% of the accounts receivable. This fee will vary by risks the factor has identified and other aspects of the factor’s process, the amount advanced to the company will be net of factor fee. Features of factoring, when compared to account receivable financing include:

  • Offer more flexibility than accounts receivable financing, because businesses can pick And choose invoice to sell to the factor.
  • Fairly easy to qualify for and is ideal for new and financially challenged companies.
  • Has a simple fee structure that helps the company track total costs on invoice-by-invoice basis.

Industries That Use Factoring

In general, invoice factoring can be used by any business that sells products or services to another company on credit, net- 30 –to net- 60 day terns, either domestic or international, and have to wait to collect payment.

Examples of such businesses include but not limited to the following:
Manufacturers, Wholesalers, Distributors, Food Services, Import/Export, Agriculture, Beverage (Beer, Wine, Spirit), Trucking, Freight Brokers, Staffing, Janitorial