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Invoice factoring, also called accounts receivable finance, or accounts receivable factoring, is a form of commercial finance whereby a business sells its accounts receivable (in the form of invoices) at a discount. Factoring is considered off balance sheet financing in that it is not a form of debt or a form of equity. Factoring is a financing option for young, undercapitalized businesses that have the profit margins to absorb the factor's fee. Factoring is a flexible form of loan, which advances money to a company as it issues new invoices. Factoring is a widely used financial product that transacts over $70 billion of volume each year in the United States alone, and is one of the most popular forms of financing in Europe.
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