The process of invoice factoring works in just a few simple steps. When an invoice is created, you sell it to the “factor” at a discounted rate – usually about 3 to 5 percent off of the invoice total. Factoring means you do not have to wait for the customer to pay to start collecting money from the invoice.

First you, the business owner, notify the factor that the invoice has been created. Usually this can be done electronically. You provide the customer's contact information to the factor, and the factor will confirm the invoice with your customer.

Typically, invoices are confirmed with a simple letter or phone call. Usually the factor appears to your customer to be a billing processor or department, confirming the invoice on your behalf. This way, the customer does not realize you have sold your invoice to a third party.

Some invoice factoring companies are willing to remain completely invisible to your customers. And after you have established a relationship with your factor, and they are more familiar with your business and your customer base, they will likely stop confirming every single invoice.

After the invoice has been confirmed, the factor pays your business what is known as the “advance rate.” This is a percentage of the invoice total, typically around 70 to 85 percent.

The factor then collects the total amount of the invoice from your customer. They keep their 3 to 5 percent, and forward the rest of the total to you.

Invoices factoring increases your business' working capitol and helps improve the credit rating of your business. And, when factoring your invoices, you are in control. You decide which invoices to factor and which ones to collect yourself, based on your relationship with your customer base.

Have you just recently started up your business? Are you finding it difficult to build enough working capitol to run your business day to day? Invoice factoring can work as a bridge to get you over the rough waters after start-up until your business is able to run smoothly.

And, if your business has poor or no credit history, invoice factoring is an option to consider if loans or liens won't work for you, or if you consider them too risky.

A steady, reliable cash flow is necessary for any business to operate smoothly. Worrying about your cash flow also causes business owners more stress than almost any other aspect of their business. Invoice factoring allows you to stop worrying. It is the simple, fast way to increase cash flow now.