Some invoices get paid up to 60 days after the product has been delivered. In the meantime, the business needs to support expenditures from its own reserves. You staff, office rent, utilities, mortgage, stock, materials, etc cant wait 60 days or the business will exhaust its resources and have to cancel new orders until more money is available. Factoring and it’s variations like invoice discounting, help solve that problem by using the unpaid invoice as a tradable asset, which can be sold or lent against. Factoring companies can either buy these invoices for a reduced price, but transfer funds within a few days, or lend money using them as a guarantee and then discount their cut when the customer pays.
What a factoring broker does is they examine your company, and analyse your cash flow. Most businesses differ greatly from one another even in their own niche. Then the broker (me) would suggest а list of renowned factoring establishments, who can provide the best funding conditions.
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