Here are the types of companies that will qualify for invoice factoring:
Any company that invoices another company or government agency for work completed.
So retail selling to consumers will not, consignment sales will not, anything to do with real estate will not, restaurants, gas stations, cellular phone stores won’t be able to qualify.
Usually a service is provided or a product is delivered. This can happen on an ongoing basis or a single event. What determines the ultimate funding decision is the creditworthiness of the account debtor aka the customer. The factoring company will go through public records to find out what credit may be available given the customer’s credit history.
So if your company isn’t very strong financially, but your customer is a great big company, no problem we can fund the invoice. This is good for you and us. You will know up front who you are extending credit to and the likelihood that the invoice will get paid on time.
In theory, as you begin to become more successful and start getting bigger and better customers, they will require payment terms as a condition of the sale. By factoring the invoice you have access to that money before the customer pays their bill.