Factoring — Financing through invoice sales
Factoring is a financial service where a business sells its unpaid invoices to a factoring company (factor) at a discount, receiving cash immediately — instead of waiting for the client to pay.
Definition
Factoring is a financial service where a business sells its unpaid invoices to a factoring company (factor) at a discount, receiving cash immediately — instead of waiting for the client to pay.
Details
Process: 1) Issue invoice to client. 2) Submit to factor. 3) Factor pays you 80-90% immediately. 4) Client pays factor. 5) Factor pays you the remainder minus fee (1-5%). Fee is tax-deductible. VAT on the original invoice remains unchanged.
Example
You have a 500K MKD invoice due in 60 days. Factor pays you 450K MKD immediately (90%). Client pays 500K to factor after 60 days. Factor returns 50K − 15K fee = 35K MKD.