Factoring is a cash flow management tool available to any business that sells products or services to other business and waits for the accounts payable invoice to be processed. As opposed to waiting for the actual invoice payment, factoring will immediately convert a company’s accounts receivable or purchase orders into working capital. This is accomplished by selling the invoice or purchase orders to a third-party factoring company at a slight discount to face value.
Advantages of Invoice & PO Factoring
- Unlike a traditional loan, the amount you can borrow is not pre-determined or capped.Â Your factoring advance will increase as your receivables grow.
- Factoring advances are not treated as debt on your balance sheet.
- Eligibility is not dependent upon your personal credit score.
- Quick and simple funding solution that provides immediate cash flow to your business
- Personal guaranty’s may be required in some circumstances.