Factoring is the selling of your invoices for immediate cash. A qualified client can receive up to a 90% advance on the gross amount of the invoice. The 10% "reserve" is refunded to the client once the invoice pays, minus the factoring fee—also known as the "discount".
In many cases, factoring is used to fund the growth of the business and expand operations. With that comes significant capital needs: Purchasing Equipment, Payroll Expense, Fuel, Supplies and Materials, Maintenance, and Insurance Costs.
Many startups and established businesses cannot qualify for a loan at a bank. Factoring allows a business to grow without taking on debt.
Factoring also allows the business owner to maintain their ownership percentage, by not having to give away a piece of the company to an outside investor with capital.