What is Invoice Factoring?

What is Invoice Factoring?

A Simple Explanation

Factoring is a type of invoice financing, but it is not a loan. Very simply, invoice factoring is the practice of selling account receivable invoices to a factoring company at a discount (The Fee) in exchange for immediate cash (The Advance). The factoring company then takes over AR management and credit control of the invoices and, when payment is made, pays the client business the remaining balance (The Reserve).
 

diagram of invoice amount and factoring funds

Figure II: Anatomy of a Factoring Transaction


Freight Factoring is a particular form of invoice factoring designed specifically for transportation companies. Main features include best rates for trucking companies, fast funding and ease of use.


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