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What is Factoring to a Small Business

Factoring to a small business that’s in the position to take this action should always keep an open mind to it. It can increase and free up cash flow for other business operations and even expansion.

When applying for alternative financing, the first thought that comes to mind for many small business owners is to go straight to the bank; however this is not always the best or most cost effective option. In many cases it can be the most costly choice because of the duration of time it takes for approval, in some cases 4-6 weeks. In reality, many banks are not approving loans in today’s economy. When a bank loan isn’t the best or conceivable choice, an option many business owners may not consider or even know about is factoring. Factoring is where a small business arranges to sell their invoices or accounts receivable to a “factor” or a third party finance company.

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