- Work is done for a client, but payment schedules are slow.
Every business knows what this is like. You do work for a client but their pay terms are 30-60 days. If a business doesn’t factor, they are forced to wait that entire time before they see any money for that work. - Invoice is sent to a factoring company.
Instead of waiting weeks to get paid, the business decides to factor their invoice with a factoring company. The factoring company contacts the business’ debtor to verify the invoice is good. - Trucker is paid an advance.
Within 24-hours of the invoice being approved, the factoring company advances the trucker up to 97% of the face value of the invoice. - Factoring company is paid.
After waiting the 30-60 days to receive payment from their client’s debtor, the factoring company is paid the full face value of the invoice. - Factoring client is paid the balance.
Once the factoring company has been paid in full, they pay the remaining balance of the invoice to their client, minus their factoring fee.
What is Factoring? Factoring is a very simple process, which makes it a desirable alternative to more traditional sources of business funding.
Below is the very simple factoring process explained in 5-steps.