Understanding Invoice Factoring & Receivables Financing
Factoring converts your accounts receivable into immediate cash by selling the invoice at a small discount. It is not a loan, so it adds no debt to your balance sheet — and because approval rests on your customers' creditworthiness rather than yours, it is available to businesses that would not qualify for conventional credit.
Invoice Factoring terms at a glance
Invoice Factoring — typical parameters
Illustrative market ranges. Your actual terms depend on lender underwriting, credit, collateral and program availability.
| Facility size | $10,000 – $10,000,000/month |
|---|---|
| Speed to funding | 24 – 48 hours after setup |
| Advance rate | 80% – 95% of invoice face |
| Factoring fee | 1% – 5% per 30 days |
| Term | Month-to-month or contract |
| Minimum credit score | No minimum (customers' credit matters) |
| Time in business | No minimum |
| Recourse | Recourse or non-recourse available |
| Notification | Notification or confidential |
| Debt created | None — it is a sale of an asset |
How Invoice Factoring can help you
Factoring solves a very specific and very common problem: profitable on paper, broke in the bank account. It is the classic condition of a growing B2B company.
Growth is consuming your cash
This is the paradox that kills healthy companies. Winning a large account means hiring, buying materials and delivering — all before the first invoice is paid 60 days later. The faster you grow, the further underwater your cash position goes. Factoring breaks that loop by converting each new invoice into immediate working capital, so growth funds itself instead of strangling you.
Your customers are large and slow
Selling to hospital systems, national retailers, universities or government agencies means excellent credit quality and terrible payment speed. Factoring is ideal here — the creditworthiness that makes them slow to pay is exactly what makes their invoices easy to factor at the best rates.
You cannot qualify for a bank loan yet
Because the factor is underwriting your customers, a two-month-old company invoicing a Fortune 500 buyer can get funded while a bank would not return the call. Startups, companies with tax liens, and businesses recovering from a bad year all use factoring for precisely this reason.
You need funding that grows automatically
A term loan is fixed at closing. A factoring facility scales with your sales — invoice more, access more, with no reapplication. For a business doubling year over year, that elasticity is worth more than a lower rate on a static amount.
You want to stop chasing payments
Most factoring arrangements include collections and credit checks on your customers. That hands off the least pleasant part of running a B2B business and gives you an early warning system on customers whose credit is deteriorating.
How the process works
Set up the facility
We verify your business and run credit on your customers. Setup typically takes two to five business days, and it is done once.
Deliver the work and invoice
Business as usual. You complete the job or ship the product and issue the invoice.
Submit and get advanced
Send the invoice to the factor and receive 80% to 95% of face value, usually within 24 hours.
Customer pays, you get the rest
When your customer pays on their normal terms, the reserve balance is released to you less the factoring fee.
What you will need to qualify
- B2B or B2G invoices (not consumer)
- Creditworthy customers
- Completed, deliverable work
- No existing liens on receivables
- Accounts receivable ageing report
- Sample invoices and customer list
The honest drawbacks
What we would want to know if we were you
Two things to watch. First, recourse versus non-recourse: recourse is cheaper, but if your customer never pays, you buy the invoice back. Non-recourse costs more and shifts genuine credit risk to the factor — read the definition of what triggers protection, because it usually covers insolvency and not slow payment. Second, notification: most factoring tells your customer to remit to the factor. Many large buyers see this daily and think nothing of it, but if it matters in your industry, ask us specifically about confidential (non-notification) programs.
Invoice Factoring — frequently asked questions
In a standard notification arrangement, yes — they receive a notice to remit payment to the factor. In trucking, staffing, manufacturing and government contracting this is completely routine. If discretion matters, confidential factoring and invoice financing both keep the arrangement private, at a somewhat higher cost.
Typically 1% to 5% per 30 days outstanding. A $100,000 invoice at 3% that pays in 30 days costs $3,000. Cost is driven by your customers' credit, your monthly volume, average invoice size, and how quickly your customers historically pay.
Not necessarily. Spot factoring lets you select individual invoices, and many facilities let you factor by customer. Whole-ledger arrangements — where everything goes through the facility — earn the lowest rates, so there is a real trade-off between flexibility and price.
Often yes, which is one of factoring's genuine advantages. It usually requires a subordination agreement with the taxing authority, and we handle that process. Many businesses use factoring specifically to generate the cash flow needed to clear a lien.
In factoring you sell the invoice; the factor owns it and collects. In invoice financing you borrow against invoices you still own and continue collecting yourself. Financing is confidential and keeps the customer relationship entirely with you, but it typically requires stronger credit on your side.
Related business programs
Invoice Factoring sits alongside a number of related structures. If your situation is close to but not quite this product, one of these is probably the better fit — and the same single application reaches all of them.
- SBA Express — A streamlined SBA path to $500,000 with a 36-hour SBA response instead of the standard review.
- Asset-Based Lending (ABL) — A facility sized against your receivables, inventory and equipment rather than your profit history.
- Accounts Receivable Financing — Borrow against your open invoices while keeping ownership of the receivable and the customer relationship.
- Payroll Funding — Dedicated capital to make payroll on time when client payments and pay periods do not line up.
- Supply Chain Financing — Extend your own payment terms while your suppliers still get paid early.
- Contract Financing — Capital advanced against signed government or commercial contracts before the work is billed.
- Inventory Financing — Funding to buy stock ahead of a season, using the inventory itself as collateral.
- Vendor Financing — Programs that let you offer your own customers payment terms without carrying the risk.