Accounts receivable (AR) financing, also known as factoring, is purchasing AR invoices at a discounted price. If your clients pay you in 30, 60, 90 days or more, you have an opportunity to derive liquidity from your invoices.
Factoring allows lenders to provide funds to start-ups, unprofitable companies, and even businesses in bankruptcy because financing receivables relies on your clients’ credit instead of yours.
Accounts receivable aren’t debts but assets. Leveraging them for financing is like outsourcing your AR department. Financing receivables allows you to benefit from numerous advantages.