Invoice factoring is a financial tool that can provide immediate cash flow to businesses. It is a transaction where a company sells its accounts receivable, or invoices, to a third party, known as a factoring company. The factoring company then advances a portion of the invoice value to the business, typically around 80-90%. Once the invoice is paid by the customer, the factoring company collects the full amount and reimburses the remaining balance to the business, minus their fees and charges.