Cash flow factoring or accounts receivables financing has quickly become the preferred why for small and medium size businesses to get there hands on cash fast. Because of the quick turnaround usually 24 to 48 hours, many business owners choose it over traditional bank loans, but what exactly is cash flow factoring and how can it help your business? Well, cash flow factoring is when a business sells invoices at a discount to a factoring company. It is not a loan and is based on the customers credit worthiness, not the business. If your company needs working capital fast for any number of reasons it is a great way to raise it.

There are also receivables marketplaces where you can auction your invoices yourself. Many business owners use these marketplaces because they have much more control over how much discount they are willing to give. Receivables exchange is one of the first and the largest on-line receivables marketplace with more than 100,000 users. Most banks also offer factoring services, but require much more paperwork and a longer turnaround time in getting the money to your business.

It is estimated that billions of dollars worth of account receivables get factored every year all over the world. There are factoring companies that specialize in specific industries such as health, telecommunication, and transportation to name a few. There are also some factoring companies that only work with domestic business and some that do business globally.

While it is important for any business to have immediate cash to support growth, factoring can become costly. The fees the factoring companies charges can add up over time, even the marketplaces have a number of fee they charge members. Make sure you have a full understanding of all the fees or have your attorney go over the legal paperwork with you.