Reserve Account (Factoring)
The portion of an invoice's value held back by a factoring company after the initial advance, released to the business once the customer pays in full.
If an invoice is factored at an 85% advance rate, the remaining 15% sits in reserve until the customer pays, at which point that reserve is released back to the business minus the agreed factoring fee.
The reserve account is what protects the factoring company against a shortfall if a customer pays late, disputes the invoice, or doesn’t pay at all, particularly under a recourse factoring arrangement.
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