Running a business can be challenging when you’re waiting weeks or even months for customers to pay. In the meantime, bills, payroll, and supplier costs keep coming. Factoring is a proven solution to turn those unpaid invoices into immediate working capital.
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What is Factoring?
Factoring is a financial transaction where your business sells its unpaid customer invoices to a factoring company (the “factor”) at a discount. In exchange, you get most of the invoice amount up front, often within 24 hours. When your customer pays, the factor sends you the balance, minus their fee.
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How It Works – Step by Step
1. You Deliver the Product or Service – Your customer receives the invoice.
2. You Sell the Invoice to a Factor – The factor advances 70–90% of the invoice value.
3. Customer Pays the Factor – The factor collects payment directly from your customer.
4. You Get the Remainder – The factor sends you the remaining balance, minus a small fee.
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Who Uses Factoring?
Factoring works for many industries, especially those with long payment cycles:
• Construction & Contractors – Waiting on progress payments.
• Trucking & Logistics – 30–60 day freight invoice terms.
• Manufacturing – Large orders with extended payment schedules.
• Staffing Agencies – Payroll due weekly, client payment in 45+ days.
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Why Choose Factoring?
• Fast Cash Flow – No more waiting 30–90 days for payment.
• Flexible Funding – Based on your sales, not your credit score.
• Growth Support – Take on larger orders without worrying about cash gaps.
• No New Debt – It’s not a loan — you’re selling an asset you already own.
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Qualifying for Factoring
Approval is usually easier than with bank loans. Factors mainly look for:
• Creditworthy Customers – Your customer’s payment history matters more than yours.
• Valid Invoices – Work completed or goods delivered.
• No Conflicting Liens – The factor needs first rights to your accounts receivable.
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Factoring vs. Other Financing
Unlike loans that require strong credit and collateral, factoring focuses on your customer’s ability to pay. It’s ideal for businesses with consistent sales but slow-paying clients.
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Bottom Line
Factoring helps bridge the gap between delivering your work and getting paid. It’s a simple, flexible way to keep your cash flow healthy and your business moving forward.
Factoring 101: Turning Invoices into Instant Cash Flow
