Factoring is a financing method that allows businesses to receive cash quickly by selling their outstanding invoices to a third-party financial company, also known as a factor. The factor purchases the invoices at a discounted rate and then collects payment directly from the customer. This provides the business with immediate cash flow, while the factor takes on the risk of collecting payment from the customer.
Factoring is typically used by businesses that have cash flow problems due to slow-paying customers or long payment cycles. Instead of waiting for payment, businesses can use factoring to receive cash quickly and continue operating without interruption.
The process of factoring typically involves the following steps:
Factoring fees can vary depending on a variety of factors, including the creditworthiness of the business and its customers, the volume of invoices being factored, and the length of the payment terms. Fees can range from 1-5% of the invoice amount.
Factoring provides a number of benefits to businesses, including:
Factoring can be used for a variety of purposes, including:
Factoring is a financing method that provides businesses with immediate cash by selling their outstanding invoices to a third-party financial company. It can be an attractive option for businesses that need to manage their cash flow, fund growth initiatives, pay off debt, or take advantage of time-sensitive opportunities. If your business is struggling with cash flow problems due to slow-paying customers, factoring may be a viable solution to help you keep your business running smoothly. Please note this is currently available only to customers in Quebec, Ontario, and the Maritimes.