What is e-factoring?

E-factoring is a digital form of factoring in which businesses sell their outstanding invoices online to a factoring company. In return, the business receives an advance payment on the invoice amount — often within a few days, or even within 24 hours. The factoring provider then takes over the responsibility for collecting the outstanding amount from the client.

This form of financing is aimed at improving cash flow. By using e-factoring, business owners no longer need to wait for clients to pay — they gain fast access to their funds.

Table of contents:

Who is e-factoring for?

E-factoring is particularly popular among:

• Self-employed professionals and freelancers who often face delayed payments from clients
• SMEs with limited financial reserves or seasonal cash flow fluctuations
• Businesses experiencing rapid growth and in need of additional working capital
• Industries where long payment terms are standard, such as construction, logistics and professional services

With the rise of digitalisation, e-factoring has become more accessible than traditional factoring. Thanks to online platforms, the process can now be completed quickly and largely automatically.

For more information, see our article: Factoring for freelancers.

Pros and cons of e-factoring

Pros

• Quick access to funds — often within 24 to 48 hours
• Improved cash flow
• No need to manage collections yourself
• Possibility to transfer the credit risk to the factoring company

Cons

• E-factoring is not free. A percentage of the invoice amount is usually withheld
• Less control over client communication and the debt collection process
• Not all invoices are accepted (a client risk assessment is often required)
• It may cause confusion with your client if a third party suddenly becomes involved

Why Payt is a strong alternative to e-factoring

Payt does not offer e-factoring, but it does help businesses get their invoices paid faster — without involving a third-party factoring provider.

With Payt’s accounts receivable management software:

• You send professional invoices with automated follow-ups
• You set reminders on your own terms
• You enable customers to pay and ask questions through the invoice portal
• You maintain real-time insight into outstanding invoices and payment behaviour

On average, businesses that use Payt are paid 30 to 50% faster. This provides a long-term solution to cash flow issues, without the disadvantages of e-factoring, such as high costs or reduced client contact.

Curious to know what Payt could do for your business? Download our brochure below.

Frequently asked questions