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Factoring is a financing method for business owners to secure working capital and ensure timely payments. For instance, if a furniture maker ships 100 tables to a retailer and sends an invoice, they need immediate cash to purchase raw materials and cover employee wages. However, the retailer may take 30 to 90 days to pay the invoice. In this scenario, a factoring company validates the retailer's creditworthiness, maintains payment records, and collects payments on behalf of the business. This allows the business owner to focus on operations without waiting for the invoice to be paid.