Off Balance Sheet Financing

One of the benefits to using invoice factoring for operational cash flow is an accounting mechanism called “off balance sheet.” Because factoring accounts receivable does not generate a long time liability or Loan on your balance sheet, it has no negative affect on the Liability side of the ledger. Factoring is an advance on a completed invoice, not a loan that must be repaid. The customer pays their bill and the transaction is final. There are a variety of reasons that it might be handy to keep a strong financial statement, including getting better credit terms with your vendors, negotiating with a landlord for new space and ultimately seeking institutional lending.