How do factoring companies work?
When your business works with a factoring company, the company purchases your outstanding invoices and pays you for them—usually very quickly. Typically, they only pay you a percentage of the value of the invoices upfront, usually up to 80%.
Next, the factoring company (in most cases) takes over the responsibility of collecting payment from your customers. Once your customers pay, you’ll receive the remaining percentage (the 20%), minus the factoring company’s fees.