If you are an owner of a small enterprise which is currently having a little financial difficulty, such as unpaid debts, then accounts receivable factoring might very well be the one thing between your company and a certain bankruptcy in the near future. Accounts receivable factoring is, simply, an arrangement in which a company utilizes its account receivables, including but not limited to any outstanding invoices to its customers, as a collateral. The invoices will then taken over by the factoring company purchasing them, giving your own business instant capital without all the long complicated procedure that you have to go through if you opt to get a business loan from a bank instead.


There are many reasons why businesses opt for accounts receivable factoring as opposed to business loan. One of the commonly cited reason is the speed by which you can receive the funding you need. Many outstanding account receivables are often caused by slow-paying customers–there is no exact method to avoid them or to make sure that all your customers are paying their due on time, and this can lead to strained cash flow which may negatively affect your business. With accounts receivable factoring, however, you can get paid for those outstanding receivables within 24 hours, without any complicated red tapes and lengthy procedure you have to go through.

Unlike business loans from the bank, account receivable factoring is not a loan. There is no need to worry about repayment, as you will be selling your own accounts receivable instead of borrowing money from the bank. You simply have to submit the invoice you want to factor to the accounts receivable company and wait for them to verify it. Once your invoice is verified, the factoring company will advance you cash for up to 90% of the value of your invoice, usually within 24 hours since it is verified.