Invoice factoring, also known as accounts receivable factoring, is a form of small business financing where a business sells its invoices to a factoring company in exchange for upfront funding. When the invoice amount is paid by the customer, the remaining balance is paid to the business owner minus a fee.
Invoice factoring allows you to receive the working capital you need to maintain operations and plan for the future, but without taking on the periodic fixed payments associated with a term loan. If slow-paying clients are stalling your ability to pay bills or meet payroll, invest in technology and equipment or hire more staffing, invoice factoring can help you bolster cash flow by liquidating your outstanding accounts receivable to meet your business needs.
Rather than waiting 30 to 120 days for your customers to pay you the money you need to run your business, invoice factoring provides you with working capital within 1-2 business days.
How Does Invoice Factoring Work?
- Small business owners sell outstanding invoices to a factoring service (the factor) at a discounted rate
- The factor advances a lump sum up to 95% of the value of the invoice
- The factor then collects all payments directly from the client
- The factor sends the remaining balance to the business, minus any fees, which is typically an agreed-upon percentage
At Fast Commercial Capital., we take pride in the number of small businesses we’ve provided financing to, across a wide range of different industries. To get access to our loans and working capital, you have to meet the following minimum criteria:
- You need to have been in business for six months or more
- FICO score must be at least 500 or above
- Bank statements must show an average of $15,000/month in deposits for a three-month average and the most recent month.