A Guide to Invoice Factoring

Running a business of any size can be a daunting task. With such a large amount of things to focus on from keeping clients happy to managing the payroll expenses, why would you worry about cash flow problems when you don’t have to? That’s where invoice factoring comes in. It’s a quick and easy way to receive the cash you need to keep operating at optimal levels.


As one of the leading business financial factoring experts, the team from Selectpay has collected this insightful guide about it here!


How Does it Work?


Before diving too deeply into the benefits and costs of invoice factoring, it’s important to understand precisely how it works. Essentially, it’s when you’re paid money upfront from a third-party company for your unpaid invoices. It’s then the company’s responsibility to collect them and recoup their investment once they’re due.


How is Invoice Factoring Used to Boost Cash Flow?


When it comes to operating your business on a daily basis, you need to have a steady flow of cash coming in, as well as going out. Of course, an influx of the former is always preferable. Invoice factoring can help you improve your cash flow and pay for those daily expenses in a multitude of different ways including:


  • Providing the capital needed to buy new equipment
  • Enabling your business to invest in advertising and marketing plans
  • Making it easier to purchase product materials from vendors
  • Allowing you to increase your inventory and boost profit margins and sales
  • Making collecting unpaid invoices more efficient
  • Giving you the cash you need for monthly financial obligations (rent, utility bills, etc.)
  • Delivering the stability needed for hiring new employees
  • Helping your business maintain payroll payments each month


What Does Invoice Factoring Cost?     


Depending on the terms of the agreement with your invoice factoring company, the cost can vary and is a percentage of each unpaid invoice, ranging on average anywhere from two to ten percent. However, many invoice factoring companies will pay you back a portion of this percentage once the invoice has been paid. There are two components to calculating the cost of invoice factoring which include the discount rate and factoring period. The discount rate is how much the company takes from each invoice and the factoring period is the amount of time your customers are allowed by the company to keep their invoices open.


Contact us today for invoice factoring and buy now, pay later solutions!


Learn more about invoice factoring and buy now, pay later for businesses by contacting us online today or calling 1300 566 229.