Invoices are future payments for services rendered. Sometimes the promise of future payment isn’t enough and they need cash now. The process of trading those promises for cash today is known as factoring.
Many businesses provide services or products with the expectation that those will be paid for at a later date. In the normal course of business, many invoices and payments are pushed out for 30-60 days. For a large company that has overcome short-term cash flow issues, this waiting period is not a problem. But for a business that needs cash to grow their business today, the main reason a company would choose factoring is they want to cash now instead of waiting for their customers to pay, in 30 to 60 days. It could mean the difference between staying in business or closing it down. For a business that’s focused on expansion and growth, having that cash today to use in the business is a much more valuable option. Factoring gives growing companies access to the capital they need for day to day business transactions, adding additional lines of business or making payroll.