In short, invoice financing is a way for businesses to obtain cash for unpaid invoices from customers. In fact, the best way to obtain cash is in the form of a loan. In reality, invoice financing helps businesses improve cash flow because they don’t have to wait for the net pay period.
For example, you have $100,000 that is due to your company. All of the sudden, you need to pay employees, purchase new equipment, or buy inventory. Since you are waiting 30 to 90 days to get paid you fall short on cash. In this case you can sell your invoices and obtain up to 90% up front. You would obtain $90,000 immediately rather than having to wait. Finally, when your customer pays the lender you get the 10% remaining minus any interest cost.