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What Do Invoice Factoring Companies Do?
Invoice factoring companies provide multiple benefits to organizations that factor invoices.
Invoice factoring companies (also known as Factors) enable other organizations to get immediate access to working capital tied up in unpaid customer invoices for a small percentage fee (often between 5% and 10% of the invoice amount) called a factoring fee. The factoring fee is the cost of using invoice factoring as a working capital and cash flow solution.
Traditionally factoring has mainly been utilized by B2B (business-to-business) sellers who invoice their customers on terms. However, factoring is also available to eCommerce businesses and sole proprietors who sell on third party platforms such as Amazon, Zulily, Poshmark, etc., app and software developers, agencies, and others who earn payments from a third party and then wait on promised payments, often for weeks and even months.
The services provided by invoice factoring companies also facilitate competitive advantages for their clients. Since slow-paying customer accounts are no longer an impediment to cash flow, organizations that factor invoices can also extend more generous payment terms to their customers, creating a competitive advantage for them in the marketplace.