It is the modern-day equivalent of a bank overdraft, with the added advantage that available funding increases as your company grows, without the need for re-negotiating terms. Factoring provides you with the day-to-day working capital to manage your business effectively. Your question; what is invoice factoring? answered with this simple and easy to understand step by step guide. Invoice Factoring, What is Invoice Factoring & Debt Factoring from Phillip Evans Invoice or Debt Factoring can be a very powerful tool for businesses looking to ensure an effective cash flow where sales are inextricably linked to working capital. The following slide show walks you through how factoring works; take note how invoice factoring follows your sales ensuring you have adequate cash flow to fore fill your orders.