Here is how it works:
Your company delivers a $1,000 order to your customer. You have costs incurred with this order (materials, payroll, overhead, etc.). All of your capital is already tied up in the business. The factor buys the invoice for cash. In 30, 45 or 60 days, depending on the pay history of your customer, the invoice is paid. The factor subtracts the discount fee and you receive the balance or the reserve. The transaction has enabled you to receive a new $1,000 order.