A basic factoring transaction has 3 parts. First is the ’advance,’ this is the percentage of dollar amount that is funded initially. It is the percentage of the total value of the invoice. For example, if the invoice submitted is $10,000 and the advance rate is 80% then the advance will be the $8,000. Next is the ’reserve.’ This is held back until the customer pays the invoice - directly to the factoring company. Once the payment is made then the reserve is released. Factoring companies handle the reserve differently, so be sure to understand what the offer specifies. Some companies hold [...]
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[Source: The Money Blogs]
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