Factoring, commonly known as accounts receivable financing, is when a business sells its invoices to a “factor” for instant cash. The factor receives a fee when the invoice is paid.

One of the biggest challenges an entrepreneur faces is the cash-flow gap created between paying bills on time, and waiting for customer payments. In order to bridge that gap you can sell the invoices to a factor for immediate cash.  There is a fee for this service, based on the face value of the invoice amount, and the amount of time the invoice is outstanding.