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Accounts receivable loans, also known as invoice financing or factoring, are a form of short-term borrowing where a business sells its outstanding invoices to a lender in exchange for immediate cash.
The process starts when a business provides goods or services to a customer on credit. The lender advances a significant percentage of the invoice amount (typically 80-90%), and the business gets immediate cash instead of waiting for the customer to pay. Once the customer pays off the invoice, the lender remits the remaining balance to the business, deducting a fee for the service. This type of financing can help businesses improve their cash flow, pay employees, reinvest in operations, and more.
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