What is invoice factoring?
There are very few forms of business finance that have existed as long as factoring, and yet invoice factoring (also known as invoice discounting, A/R factoring or receivables financing) is not part of the common business lexicon for most B2B small business owners in the U.S.
Invoice factoring is a centuries-old business financing tool that originated when bankers would provide manufacturers with an advance on goods so that manufacturers did not have to wait for products to travel to far-away lands before taking on new business.
According to Wikipedia: “Factoring is a financial transaction whereby a business sells its accounts receivable (i.e., invoices) to a third party – called a Factor – at a discount.”
The idea of invoice factoring might seem complicated, but it’s actually very simple. Accounts receivable are assets since they represent money that will – eventually – flow in to an organization and which they can then reinvest in growing their business. Organizations choose to factor invoices with a company like Corsa Finance, instead of waiting for customers to pay, in order to expedite organizational cash flow.