AR factoring, or accounts receivable factoring, is a financial solution where businesses sell their unpaid invoices to a factoring company at a discount. This allows you to receive immediate cash for your outstanding invoices instead of waiting for customers to pay. It’s a way to improve cash flow and have working capital on hand to grow your business or cover immediate expenses.

With AR factoring, you can typically receive up to 80-90% of the invoice value within 24-48 hours of approval. The remaining balance, minus the factoring fee, is paid to you once your customer settles the invoice. This quick turnaround time makes AR factoring an excellent solution for businesses needing immediate cash flow.

While the factoring company will handle collections, they do so professionally and in your company’s name. Many businesses find that factoring can actually improve customer relationships by allowing for more flexible payment terms without straining your cash flow. Your customers will simply be instructed to pay the factoring company instead of you.

No, AR factoring is not a loan. It’s a sale of an asset (your invoices). This means it doesn’t create debt on your balance sheet and doesn’t impact your credit score in the same way a loan would. It’s often easier to qualify for factoring compared to traditional loans, as the factoring company is more interested in your customers’ ability to pay than your company’s credit history.