What is Factoring?
Factoring is a financial arrangement where a business sells its unpaid invoices to a third party, called a factor, at a discount in exchange for immediate cash instead of waiting the usual 30 to 90 days for customers to pay.
Why does Factoring matter?
Staffing agencies often factor invoices to cover payroll, since they must pay their placed workers weekly or biweekly while waiting much longer for client payment on those same hours.
How does Factoring work?
A staffing agency sells its outstanding client invoices to a factoring company, which advances a large percentage of the invoice value immediately, then collects payment directly from the client and remits the remaining balance, minus its fee, once paid.
Frequently asked questions
Why do staffing agencies use factoring specifically?
The mismatch between weekly payroll obligations and 30-to-90-day client payment terms creates a cash flow gap that factoring is designed to bridge.
Is factoring the same as a loan?
No, factoring involves selling an asset (the invoice) rather than borrowing against it, so it doesn’t typically appear on the balance sheet as debt the way a loan does.
How BrightMove helps
BrightMove’s Back Office module tracks invoicing and receivables clearly, making it easier to work with a factoring partner when cash flow timing matters. See BrightMove’s Back Office billing and invoicing.