The common business cash flow funding cycle applies delivery of goods or services, along with the invoice to the customer, who then makes the payment within the stipulated time of 30 to 90 days. Normally, the business has to past time for a while to eventually see any of its payments.

If the business uses the invoice factoring, also known as factoring receivables or discounting arrangement, the sequence of actions is not the same. In this case the business owner delivers products or services to customers along with the invoice. The invoice is also shipped to the factor or discounter who releases a percentage of the invoice value to the business owner, which could be about 80% cash flow funds within 48 hours. Normally, the customer makes its payment to the factor/discounter if it is a factoring discounting arrangement. Alternately, the customer credits it directly into a bank account controlled by the factor or discounter in the business owner’s name if it is an invoice discounting arrangement. After the payment is received by the factor/discounter, the balance of 20%, less fees and other charges is paid to the business owner added to his business funding account.

Thus, the business owner is able to access up to 80% cash flow funds from its invoice value within 48 hours, rather than wait up to 90 days for the customer to pay your cash funds that you need now for your business funding necessities.

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