Frequently Asked Questions about Invoice Factoring
What is Invoice Factoring?
Invoice factoring is a financial process where a business sells its unpaid invoices to a third party (known as a factor) to receive immediate cash. This helps companies manage cash flow more effectively.
How does Invoice Factoring work?
The process involves submitting unpaid invoices to a factoring company, which advances a percentage of the invoice value to the business. The factor then collects payment from the customer and releases the remaining balance, minus fees, to the business.
What are the benefits of Invoice Factoring?
Invoice factoring improves cash flow, reduces credit risk, enhances working capital, and allows businesses to focus on core activities. It is a flexible financing option that does not add debt to the balance sheet.
Who can benefit from Invoice Factoring?
Businesses of all sizes, especially SMEs, startups, seasonal businesses, manufacturers, wholesalers, service providers, and construction companies, can benefit from invoice factoring to manage cash flow and support growth.
Is Invoice Factoring expensive?
While invoice factoring involves fees, these are often outweighed by the benefits of improved cash flow and the ability to take advantage of early payment discounts from suppliers. The costs can vary depending on the type of factoring and the agreement with the factor.