What is factoring?

Factoring is a financial service in which a company sells its outstanding invoices to a factoring company in exchange for an upfront payment on the amount of the invoices, minus a fee for financing costs. The factoring company assumes responsibility for collecting payments from customers, thereby increasing the company’s financial flexibility and cash flow to sustain its operations and drive growth. Factoring can be beneficial for companies facing longer payment terms or irregular payments from customers. It is an alternative source of financing to traditional bank loans or business loans.