Definition
Invoice factoring is a financial transaction where a business sells its accounts receivable (invoices) to a third party (a factor) at a discount to improve cash flow.
Related Services
Factoring services and receivables management help businesses access immediate cash flow by converting outstanding invoices into quick capital.
Problem and Application
While it provides quick liquidity, invoice factoring can be costly due to the fees involved and the loss of a percentage of the invoice value.
Conclusion
Invoice factoring is a useful option for businesses needing immediate cash flow but should be considered carefully to weigh the cost against the benefits.
