Unpaid invoices can be a major problem for small businesses. Fortunately, there’s a financing option that allows you to quickly convert unpaid invoices into working capital. And you’ll also be able to pass on the responsibility of seeking payment to someone else. Think of the time and energy that can be saved by not needing to track down delinquent payments.


Invoice factoring is popular because it offers ultimate convenience. You receive a lump sum of money from a lender in exchange for most of the money owed in the unpaid invoices. Typically, you will get a percentage of the receivables up front and once the lender has collected payments from your debtors, you get what’s left of the balance after the lender deducts their fee.


The lender will work with you to determine what percentage of the receivables you’ll receive, but it’s common to get as much as 90% or higher of the value. You can usually see the funds in your account within just a few days.

Given the unique structure of invoice factoring, it shares more in common with business lines of credit than with traditional loans. You just focus on running your business and let the lender do the legwork.


Receiving a cash influx from invoice factoring can help you meet your other financial obligations. And you won’t need to worry about making payments for this type of financing, as the fees to the lender will be coming directly from the receivables.


Another benefit of invoice factoring is that you don’t need to worry about personal liability. There’s no collateral needed with this type of financing, as the risk is lower for the lender.

Invoice factoring can be an ideal option for those stressful times when unpaid invoices have piled up or cash flow is suffering. Given the speed of the funding, invoice factoring can provide assistance for unexpected expenses such as repairing equipment, purchasing materials for a big project, hiring new employees to meet rising demand, or seizing a unique business opportunity.


You’ll just need to assess your situation and see whether it’s worth the cost of invoice factoring to get the influx of cash. As long as you’re able to leverage the capital for crucial expenses, this financing can certainly be a compelling option.


It’s typically a two step process to apply: First the lender will need to get you approved and then will need to approve your debtors. To get started, you’ll want to provide:

  • Previous 6 months business bank statements
  • Current Financials (P&L and Balance Sheet)
  • AR/AP Aging Report
  • Sample Invoices to be factored

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