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Invoice Factoring: A Beginner’s FAQ


June 21, 2019

There are more than 30 million small businesses in the United States, and no two are exactly the same. However, there are some problems that are common to many small businesses and one of those is money management. If you have issues with cash flow or financial management, it can negatively impact your business in multiple ways if you don’t address them quickly. They can impact your sales, your growth and your profits. Invoice factoring is a form of financing that can help by providing near-instant cash flow for your outstanding invoices. Factoring services have helped countless businesses get back on their feet and achieve their goals. We’ve created this quick and easy FAQ to help you learn more about the invoice factoring process and whether it’s right for your business.

What is an invoice advance?

An invoice advance is the general term for the money given to you ahead of time (or in advance) by an invoice factoring company. The advance is what provides your business with the near-immediate influx of capital that it needs to stay afloat and continue to grow. The advance will be repaid to the factoring company when they collect your invoice. The factoring fees are deducted during this process.

What determines if a business qualifies for business factoring services?

Businesses invoice factoring services are available to a variety of businesses with all different types of financial situations. Approval is largely based on your customers’ credit worthiness. For this reason, invoice factoring isn’t limited to a particular industry or size of business. If you have credit-worthy clients, you can work with an invoice factoring company. Even businesses that have a significant volume of accounts receivable work with invoice factoring companies for their working capital solutions.

Is invoice factoring only an option when a business is in serious financial trouble?

Invoice factoring can be used as a flexible cash flow solution for businesses of all financial situations. Some young businesses use invoice factoring services because they don’t have enough credit to qualify for traditional forms of financing. Other businesses work with invoice factoring companies because they enjoy the predictability of payment. When you know when you’re going to get paid, you can make decisions faster, pay vendors faster and spend less time following up with clients for payment. Factoring can also help those who want to avoid potential cash flow issues in the future. For this reason, invoice factoring services are readily available for any business that wants to take control and gain financial freedom and flexibility.

How quickly can you get a cash advance after submitting invoices for factoring?

The factoring process is designed to be quick and seamless. When you submit invoices, the factoring company will verify them. Verification can include reviewing a purchase order, tracking a shipment, or communicating directly with your customer. In many cases, you’ll be able to get a cash advance the same day you submit the invoice for factoring.