Factoring is an age-old form of financing providing companies with much-needed cash.

It takes money to make money, as any business owner knows. But many small businesses also know what it’s like to be turned down by a bank for a loan or line of credit, not get as much as they need, or simply not get the cash quickly enough to take advantage of an opportunity.

It’s not just start-ups that run into financing difficulties. Even an established company that is growing rapidly will frequently have financial challenges. To make matters worse, owners of small businesses have an especially difficult time getting business credit without relying on their own personal credit and assets as guarantees.

The most familiar method of alternative financing is “accounts receivable” financing. Other terms for this type of financing are factoring or invoice financing or invoice discount financing. Whatever term you may hear, the most important thing to understand is that it means the selling or financing of an invoice or group of invoices to obtain cash quickly.

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