What is an invoice factor?

Invoices Factoring , also known as Financing receivables , is a method used by companies to release capital that is tied in customer invoices. In the invoice factor, one company agrees to provide payment in exchange for pending invoices owed by another company. In this way, the second company will receive the money it needs to pay its employees, pay their accounts and expand their business.

If the company needs to get the money quickly, the invoice factoring can be a viable option. Through the invoice factoring, the company basically sells the rights to outstanding invoices of other companies for a rate that is lower than invoices. In this way, the company selling invoices will receive a percentage of the amount owed on the invoice much earlier than originally expected. The company, which, on the other hand, buys invoices, will achieve profit because it is waiting for the payment of invoices in full.

while attempting to closedThe invoice factor agreement is a company that purchases the rights to invoices, generally willing to pay more for newer invoices. This is because older invoices are generally considered to be a greater risk, because there is a better chance that the customer will be the default after payment. While most companies are pursuing a factor's invoicing as a means of releasing their capital and to obtain a payment earlier, some companies are completing the factors of factors to avoid the risks associated with waiting for the invoice payment. By transferring the risk of failure to a company that purchases the rights to the invoice, the Seller Seller can focus more on completing current business activities and planning for the future rather than collecting invoices in the past.

For enterprises buying invoices through an invoice factor, work on payment is no problem, because it is generally the only function of THV business. Buying invoices in the past is not usually a risk for these businesses because they are experts in the collection of financial. Therefore, it is a mutually advantageous situation for both companies involved in the invoice factor.