Invoice factoring is a way for businesses to raise money by selling invoices to a factoring company at a discount.

Factoring usually includes credit control services, and helps companies release cash from their debtor book. 

The credit control function in a factoring facility is outsourced, meaning the client has little control over their sales ledger.

The factoring facility is disclosed i.e. your customer will know that you are using a factoring facility.

• You submit details of your invoices to a factoring company to determine if you are eligible for the factoring facility. The invoice factoring company will then assess how risky they feel the loan is  and will then give you their quote.
• Once an invoice factoring agreement has been signed, the factor will advance you the money.
• The factor will then commence collection of the invoice with your customers
• Once the invoice has been collected, the factor will pay you the remaining balance of your money, minus their fee

• A quick, safe source of cash flow by financing accounts receivable and releasing working capital tied up in unpaid invoices
• It can lower time spent on administration and chasing late payments since the factor assumes responsibility for collecting the debt and take over the management of your credit control
• Factoring amounts can easily expand and contract with your sales ledger.
• Invoice financing can provide better cash-flow control where there may be different credit terms across your clients and customers

Invoice factoring works well for business owners that require fast funding, have reliable customers that pay their invoices on time, and can afford the fees that come with selling invoices to a third party.