Factoring is a financing tool where the unpaid invoices of a business are sold to a third party or factoring organization to finance the working capital needs. This releases funds for improved cash flows and facilitates smooth business operation and expansion. The factoring company charges certain interest for this and waits for realization of the payments from the customers. Depending on the need of the business, factoring organizations or lenders offer different factoring plans.Different types of FactoringSingle Invoice Factoring is mostly aimed at small and medium sized businesses at want cash flow and business finance without contract terms. Under this, one single invoice is put up for financing, which can receive up to 80% financing depending on the creditworthiness and strength of the debtor. As soon as the debtor is paying up to the financer, the business gets back the balance of the invoice amount less the fees for financing the very next day. The advantage of single invoice factoring is that it is very flexible and is low on the fees. However it is more expensive than full service contracting for obvious reasons.Full Service Factoring is a service that is applicable for those businesses who do not have dedicated accounts departments. Under this kind of business lending, you get, along with the financing on invoices, support service in the form of Credit Department, Collection Department and Accounts Department from the financing organization. This is helpful for small businesses since bad debt can be avoided and also since they don’t have to chase debtors, can concentrate on business growth. This also offers 80% of the invoice value as finance and the rest 20% is returned within a month’s time after deducting the fees. The fees for full service factoring are higher than single invoice factoring.Partnership Factoring is suitable for businesses that already have a full fledged account department and a booker. Under this arrangement, only financing is sought from the lender without any additional services. At times lenders do offer credit check and account management services, so that businesses need to handle minimal accounting worries and can concentrate on business growth. Evidently fees are lesser than full service factoring. Partnership factoring is mostly done online and is a paperless transaction.Confidential Factoring is a tool designed for larger businesses and has no lock in contracts. Under this arrangement the business gets to select which of the invoices to be funded and also the number of debtors to be involved in the process. Confidential factoring is at times backed by real estate security and under such circumstances; it becomes a very flexible financing tool. The factoring processes may involve disclosing the arrangement to your debtors or keeping it under wraps. If the debtors are not notified, the price or fees is higher since the lender runs higher risks. The business is able to draw up to 80% of the invoice value at request and commercial interest rates are applicable.