Factoring lets you take care of expenses while you wait for client payments. Use factoring to get working capital for new inventory, supplies, or additional labor. Then, you’ll be prepared to take on new clients and larger accounts. Use this strategy when you’re ready to take your business from the status quo into a growth phase.

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Don’t put off progress for weeks or even months while you wait for your clients to pay their accounts. In some industries, it’s customary to offer 90 days to pay. But, that could leave your business strained for funds in the meantime. If you need to bring in materials for the next order or just want to get a jump on paying your expenses, consider factoring. Factoring lets you sell your invoices, purchase orders, contracts, and other accounts receivable to get cash now.

Factoring doesn’t add debt to your balance sheet. Instead, it lets you sell AR assets to a firm called a factor. The factor gives you a percentage upfront and waits to collect payment from your client. When payment is received, the factor recovers their expense, charges a small fee, and forwards the remaining funds to you. Factor large invoices or multiple invoices at once. Since factoring is based on your clients’ creditworthiness, you don’t need good credit to qualify.


  • Easy qualification process.
  • Get your funds fast.
  • Doesn’t add debt to your balance sheet.
  • No long-term commitment.

In most cases, your client will pay the factor directly when they pay their account. However, if your client requests a refund or neglects to pay their invoice, you may be responsible for settling the account with the factor. Be sure to understand the detailed terms before entering a factoring agreement. 

Not all businesses extend credit to their clients. If you get paid in advance or upon delivery, factoring won’t work for you. You may consider a line of credit, a hard money loan, or a term loan instead. Talk to your broker to find the best fit. 

Since factoring is based on your client’s credit, not yours, it doesn’t typically affect your business or personal credit scores. Check to see if your factor does a hard credit check, which can sometimes affect your score. 

The best way to connect with a reliable factor is to contact your broker. This way, you can compare factors across companies to find out which will work best with your business.