Debtor Factoring: What is it and How Does it Work?
When your business is experiencing cash flow problems, it can be difficult to meet your obligations. You may be wondering if debtor factoring is a viable option for you. Debtor Factoring is a process in which a company sells its accounts receivable (i.e. invoices) to a third party for immediate cash. This third party is known as the factor. In this post, we'll discuss what debtor factoring is, how it works and the benefits and drawbacks of this type of transaction. What is debtor factoring? Debtor factoring is a process by which a business sells its accounts receivable (invoices) to a third party at a discount. In short, Invoice Factoring For Small Business is a way to get cash quickly by selling off some of your future income. Here's how it works: the business sells its invoices to the factor for, let's say, 80% of their value. The factor then goes out and collects on those invoices, keeping the full amount (minus their fee, of course). This can provide the business wi