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A process by which a company sells its accounts receivables or invoices
to a funding source for an immediate cash advance. This advance is typically
50% to 80% of the face amount of the invoice. The amount not advanced
is called a reserve. Your customer then pays the invoice to the funding
source according to the terms of the invoice. When the monies are received
by the funding source, the reserve is paid to the company, less the
funding source’s fee. Funding source fees vary greatly, but range
from 2% to 8% depending on the credit worthiness of the customers, the
aging history, the industry etc.
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