Here is a basic example of how invoice factoring works.
Business A is a small business.
They work with many clients, including a large corporation we’ll call Client X.
Client X has a strong credit history and is a long-time customer for Business A.
Client X pays their invoices in 30 days, but Business A needs the money sooner. This is when Business A decides to factor their invoices.
The factoring company promptly advances Business A between 75% and 100% of the invoice amount and handles the collections process.
Within 30 days, Client X pays the invoice in full to the factoring company. The factoring company settles the transaction by paying the remainder of the invoice, minus a small factoring fee, to Business A.
Factoring invoices is a risk-free and debt-free way to get immediate cash on your invoices!