Factoring (Invoice Financing)

Factoring allows businesses to improve cash flow by selling their invoices to a financing partner and receiving immediate payment instead of waiting for customers to pay.

This solution helps companies:

• Access working capital quickly

• Reduce administrative work

• Protect against late or unpaid invoices

Factoring is especially beneficial for growing businesses that need stable liquidity to cover operating costs, invest in growth, or manage seasonal fluctuations

What Is Factoring?

Factoring is a financial service that enables businesses to improve cash flow by selling their invoices to a financing partner (the factor) instead of waiting for customers to pay on standard payment terms such as 30, 60, or 90 days.

By converting outstanding invoices into immediate liquidity, companies gain faster access to working capital, allowing them to operate more efficiently and grow without being constrained by slow-paying customers.

How Factoring Works

1. You issue an invoice to your customer as usual after delivering goods or services.

2. The invoice is sold to a factoring company.

3. Immediate payment is made to your business, typically within 24–48 hours (often 70–95% of the invoice value).

4. The factoring company collects payment from your customer on the due date.

5. The remaining balance (minus fees) is paid to you once the invoice is settled.

Depending on the agreement, factoring can be:

• With recourse – you remain responsible if the customer does not pay.

• Without recourse – the factoring company assumes the credit risk.

Key Benefits of Factoring

Improved Cash Flow

• Immediate access to capital instead of waiting weeks or months for payment.

• Better liquidity to cover salaries, rent, suppliers, and taxes.

Reduced Administrative Burden

• Outsourced invoice management and collections.

• Less time spent on follow-ups and payment reminders.

Protection Against Payment Risk

• With non-recourse factoring, businesses are protected against customer insolvency.

• More predictable cash flow.

Supports Business Growth

• Enables companies to accept larger orders.

• Facilitates expansion, investments, and scaling.

• Helps manage seasonal fluctuations.

Who Can Benefit from Factoring?

Factoring is particularly attractive for:

• Growing businesses and scale-ups

• SMEs with long payment terms

• B2B companies

• Consulting and professional services

• Staffing and recruitment agencies

• Logistics and transport companies

• Manufacturing and wholesale businesses

• Construction and project-based companies

• Exporters and international traders

It is ideal for companies that have reliable customers but need faster access to cash.

What Does Factoring Cost?

Factoring costs vary depending on invoice volume, customer risk, and contract type. Typical pricing includes:

Factoring Fee

• Usually 1–5% of the invoice value

• Covers administration, financing, and credit risk (if non-recourse)

Interest or Financing Fee

• Charged on the advanced amount until the invoice is paid

• Often linked to market interest rates

Additional Costs (May Apply)

• Credit checks

• Invoice handling fees

• Collection or reminder fees

Despite the cost, many businesses find factoring cost-effective due to:

• Reduced financing risk

• Lower administrative costs

• Improved liquidity and growth opportunities

When Is Factoring a Good Choice?

Factoring is a strong solution when:

• Cash flow is strained due to long payment terms

• Rapid growth requires additional working capital

• Traditional bank loans are not flexible enough

• Predictable liquidity is critical