Invoice factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (invoices) to a third party (factoring company) at a discount.
Factoring can be used to help you obtain cash. Perhaps your currently available cash balance is insufficient to meet your obligations and accommodate your other cash needs, such as for new orders or contracts.
The use of factoring to obtain the cash needed to accommodate a firm's immediate cash needs will allow you to maintain a smaller ongoing cash balance. By reducing the size of your cash balances, more money is made available for investment in your company’s growth.
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