How do factoring companies work? Simply, factoring is the process of selling accounts receivable to an investor rather than waiting to collect the money from the customer.

Factoring Companies have the financial backbone of many of America’s most successful businesses. Ironically, invoice factoring is seldom taught in business schools, is rarely mentioned in business plans and is relatively unknown to the majority of American business owners. Yet it is a financial process that enables thousands of businesses to prosper and grow and frees up billions of dollars each year.

Interestingly, factoring has been around in many forms for thousands of years. Factoring companies are private investors who pay cash for the right to receive the future payments on unpaid invoices. An unpaid receivable (invoice) has value. It is a debt your customer owes to your company and agrees to pay in the near future.