Business
Factoring: Unlock Your Cash Flow
Unlock immediate cash flow for your startup. Learn how factoring turns unpaid invoices into working capital to fuel growth and manage expenses.
What is it?
Factoring is a financial service where a business sells its accounts receivable (invoices) to a third-party company, known as a factor, at a discount. Instead of waiting 30, 60, or 90 days for customer payments, a business gets an immediate cash advance, typically 80-95% of the invoice value. The factor then collects the full payment from the customer and pays the remaining balance to the business, minus their fee. This provides startups with crucial working capital to operate and grow without the long wait times associated with traditional payment cycles.
Why is it trending?
Factoring is gaining popularity among startups and small businesses due to tight credit markets and the need for flexible financing. Unlike traditional bank loans that scrutinize a startup's credit history and profitability, factors are more interested in the creditworthiness of the startup's customers. This makes it an accessible option for new companies that may not yet qualify for conventional loans. The rise of fintech platforms has also made the factoring process faster and more transparent, allowing businesses to get funded in a matter of days rather than weeks.
How does it affect people?
For entrepreneurs, factoring provides immediate relief from cash flow stress. It ensures they have the capital to meet payroll, purchase inventory, and seize growth opportunities without taking on new debt. This financial stability allows founders to focus on core business operations and strategy instead of chasing down late payments. By converting outstanding invoices into usable cash, factoring empowers startups to maintain momentum, manage expenses effectively, and build a more resilient financial foundation for long-term success.