Factoring
Selling an invoice to a third party for most of its value now, with the balance paid when the customer pays.
Factoring is the sale of a receivable to a factoring company. You deliver the goods or service, send the invoice and supporting documents to the factor, and the factor advances a large share of the invoice value. The customer is told to pay the factor. When it does, the factor sends you the remaining balance less its fee.
Factoring agreements differ in whether they are recourse or non-recourse, whether every invoice must be factored, how long the commitment runs, what reserves are held and how disputes are handled. It is common in trucking, where many brokers pay on net terms, and is used by some contractors on commercial work. Because the fee is charged on every dollar factored, the cost rises with volume.
General information, not legal or financial advice.