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Q.What is invoice factoring?
A.Factoring is a financing transaction whereby a business will sell some or all of its outstanding invoices at a discount to a factor (e.g. $200,000 invoice will be sold for say $100,000). The amount the invoice will sell for depends on the credit worthiness of the buyer and the age of the invoice. Typically a small business will only turn to factoring when traditional financing methods (loans and lines of credit) are unavailable.
Although factoring is a quick and easy way to solve a short term cash flow problem, it is not hassle free and is generally more costly than traditional forms of financing.
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