Invoice Factoring Loan

To factor an invoice, an unpaid invoice is sold to a lender who in turn loans out a discounted advance. Afterward, the unpaid invoice is paid back to the lender by the business' customers. Thus, invoice factoring is when a business sells an unpaid invoice to a lender who gives them funding in return. Then, the invoice balance is paid back by the business' customers to the lender, while the remaining balance is paid back to the business, minus fees kept by the lender. Up to 85% of the value of the invoice is a typical advance amount, and the outstanding 15% minus fees is received after the invoice is paid off. The invoices are self-collateralizing, making this loan easier to qualify for. This loan can be most useful for small businesses looking to boost working capital, stabilize cash flow, and sustain operations without waiting for clients to pay what they owe.