What Is Credit Factoring?

Credit factoring is simply another name for invoice factoring, and is a type of financing that allows business owners to receive up to 100% of their invoice value as soon as they are issued rather than waiting for the full payment terms.

what is credit factoring - business owner taking advantage of credit factoring

Factoring is designed to help businesses who issue invoices to business customers. It enables you to sell your invoices for an advance payment on the day they are created, rather than waiting 30+ days.

This helpfully frees up cash and improves cash flow for other areas of the business.

Instead of allowing the full payment terms of the invoice to lapse before receiving payment – which can be as long as 120 days – factoring your invoices means you can work with the cash right away. Waiting for payment for extended periods can lead to cash flow problems for your business. A factoring partner may advance you up to 100% of the invoice value when it is issued. The balance, minus fees, will follow when your customer pays.

If you’d like to learn more about invoice factoring, we have a more in depth article here. We also have a handy invoice finance calculator that can show you the invoice factoring rates you could expect to receive from a funder.

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