Bottom Line Upfront:  Factoring is very similar to "white collar loan-sharking!"  In a factoring arrangement, you are selling your unpaid (approved) invoices to a third party who buys them for less than their dollar amount.  The good news is that you get your money faster than waiting for the government to pay you, so you can do vitally important things like "make payroll."  The bad news is that factoring arrangements are usually worse than a moderately bad credit card!  Knowing how to avoid factoring landmines can save you a bunch of money because many rapidly growing small businesses are forced to enter factoring arrangements to overcome growing pains.