Invoice financing, also known as accounts receivable financing, uses unpaid invoices as collateral for immediate working capital. Key points:
Collateralized invoices: Serve as collateral for a loan or cash advance.
Immediate funds: Businesses get upfront cash (typically 70-90% of invoice value).
Repayment: Lenders deduct their fees when customers pay.
Flexible financing solution: Allows businesses to choose which invoices to finance based on immediate cash flow needs.
Creditworthiness: Lenders may assess the creditworthiness of the business's customers, who are responsible for invoice payments.