A Quick Factoring Example…

rednumbersLooking for a quick example of the factoring process? Let’s say that XYZ Enterprises makes table clothes. They receive an order for 10,000 from ABC Linens at the cost of $1.00 each.

XYZ makes the table clothes and delivers them. However, ABC Linens has up to 30 days to pay (assuming they pay on time).

Meanwhile LMN Associates wants to order 50,000 table clothes at $1.00 each.

The problem is that XYZ does not have the money to buy raw goods to fulfill LMN’s order. They need ABC to pay their bill (which is not yet due or may even be paid late)

XYZ could factor (sell) the invoice to a Factor at a slight discount – thereby getting them money they need today to take the LMN order and make even more money!

Oftentimes business owners love the flexibility of factoring. They may initially try factoring to pay for raw goods or even make payroll but many continue to factor invoices to fund expansion.

Once the relationship is setup, a Factor can usually get the business owner money within 24-48 hours. The business owner can also pick and choose which invoices to sell.


  1. Nice 1 ,it realy assisted me as im studying credit manegement and ”factoring as a source of credit ” to the consumer.#Thanks

  2. It seems to me same process like bill discounting. Is it or isn’t it?

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