Factoring

What is Factoring?

Factoring is a process used by some merchant businesses whereby credit card and other payments are sold to third party service providers who purchase future receivables in exchange for payment upfront. There are usually limits placed on what can be sold, such as a minimum amount, as well as a minimum number of months in which the business must have been in business, to sell credit card receivables. Invoice factoring, however, can be less limited.

Invoice Factoring

A debt collection agency which collects outstanding payments from debtors can purchase your outstanding invoices so that you are paid an upfront fee for money not yet collected and your debt collection agency keeps anything received. This is only one debt collection option – alternatively, you can have your agency collect payments on commission, whereby your company pays a set percentage of each successful collection in replacement of a retainer. Both methods can be effective and can help you to reclaim money which would otherwise have been lost.