Invoice factoring allows businesses to fund cash flow via selling their invoices to a factoring company at a lower rate than their actual worth. It is also known as debt factoring and asset based lending and invoice finance.
It work when one business makes an agreement with an invoice factoring company with the aim of saving time on chasing payments on their invoices. They may then in turn release up to 90% of unpaid invoices. It is then up to the invoice factoring company to chase the payment. When the invoice factoring company receives payment for an invoice you will receive that amount minus the invoice service providers’ fees.