Unlocking Tied-Up Cash: A Beginner's Guide to Invoice Factoring

Learn how B2B companies can sell outstanding invoices to get immediate working capital without taking on traditional debt.

The Problem with Net-30 and Net-60 Terms

If you run a B2B company, you know the pain of waiting for clients to pay. You deliver the product or service, but the cash doesn't hit your account for 30, 60, or even 90 days. Meanwhile, you still have to make payroll, buy inventory, and cover operational costs.

What is Invoice Factoring?

Invoice factoring is not a loan; it is the sale of an asset (your outstanding invoices). You sell your unpaid invoices to a factoring company at a slight discount. In return, the factoring company advances you a large portion of the invoice value immediately (usually 80% to 90%).

How the Process Works

• Submit the Invoice: You provide the goods or services and send the invoice to both your client and the factoring company.
• Get the Advance: The factoring company deposits the advance directly into your bank account within 24 to 48 hours.
• The Client Pays: Your client pays the factoring company directly according to the original terms.
• Receive the Reserve: Once paid, the factoring company releases the remaining balance to you, minus their factoring fee.

Why Factoring is a Game-Changer

Factoring is based on the creditworthiness of your clients, not your business. This makes it an incredibly accessible option for newer businesses or those with less-than-perfect credit, provided they work with reliable B2B clients. It turns your accounts receivable into immediate working capital, allowing you to take on larger contracts without fear of a cash crunch.

Regain Control of Your Capital

Invoice factoring empowers B2B companies to take control of their cash flow without adding debt to their balance sheets. By converting outstanding invoices into immediate working capital, you can confidently accept larger contracts and invest in operational growth without waiting on slow-paying clients.

If tied-up cash is holding your business back, Runway2Capital can connect you with top-tier factoring partners. Let us help you unlock the capital you've already earned.