Invoice factoring

Definition

Selling unpaid invoices at a discount for cash now, not in sixty days.

Why It Matters

It is expensive money. For a business that funds weeks of payroll or inventory before it collects, it can also be the difference between growing and running out of cash. Find out whether the target relies on it, and at what cost, before trusting its margins.

In numbers: A staffing agency factoring $500k of receivables at a 2% fee pays $10k to be paid weeks early; on thin temporary-staffing margins that fee is a real slice of the profit, which is why the factoring cost belongs in the earnings you underwrite.