TL;DR: Invoice factoring is one way to fund unpaid invoices, but it's not the only option. This guide explains the differences between factoring, invoice finance, and invoice discounting.
Factoring finance is the use of outstanding invoices as the basis for immediate business funding. A business that has invoiced its customers but is waiting for payment can access cash through factoring, effectively getting paid sooner by using those invoices as the funding mechanism.
A factoring finance arrangement involves three parties: the business, its customers (debtors), and the finance provider (factor).
The business raises invoices against its customers and submits them to the factor. The factor advances a percentage of the invoice value immediately. The factor then collects payment from the business's customers, and releases the remaining balance (minus fees) to the business.
Factoring finance is likely a good fit if:
Factoring finance is less suitable if:
Traditional factoring finance often involves whole-ledger assignments, debtor notification, and long-term contracts. These features made it impractical for many small businesses.
Modern invoice finance solutions have changed this significantly. FundTap offers selective invoice funding, choose which invoices to fund, keep your customer relationships confidential, and access funds within hours through your accounting software. No whole-ledger commitment, no contract period.
When evaluating any factoring finance solution, ask:
The answers to these questions will reveal significant differences between providers, and help you choose the solution that actually fits how your business operates.
FundTap provides on-demand invoice finance for AU and NZ SMEs. Select an invoice and get funded within hours, no lock-in, fees from 4%.
Yes. FundTap serves businesses across both countries, integrating with Xero, MYOB, and QuickBooks.
Most businesses receive funds within hours. Once set up, funding is typically same-day.