How does invoice factoring work? Invoice factoring is a type of embedded financing in which your customers receive funds right away by selling you the right to collect payment on an invoice. It’s a good fit for platforms that have visibility into or help manage their customers’ invoices, orders, and future payments., Invoice factoring, also known as accounts receivable factoring, lets small businesses quickly access cash by using unpaid customer invoices. This financing solution can be valuable for businesses looking to overcome short-term cash flow needs. Let’s explore how invoice factoring works, what it costs, its pros and cons, and more:, Invoice factoring is a way to get an advance on your invoices. Instead of waiting weeks or months for customers to pay, you sell your invoices to a factoring company. They pay you immediately (minus a small fee), and then they collect the full payment from your customer later. This improves your cash flow and ensures inconsistent customer payments won’t hurt your business., Understand what invoice factoring is and how it can help a business with cash flow issues or poor credit gain access to business finance., Invoice factoring is when you sell your unpaid invoices to a third-party at a discount in exchange for cash upfront., Invoice factoring is a business loan alternative that lets businesses sell their invoices to a third-party factoring company for a portion of the invoices upfront..