Invoice Factoring
Grow Today. Don't Wait 30-90 Days.
Factor your outstanding invoices and get 70–90% of the value upfront — often the same day. Qualify based on your customers' credit, not yours.
Advance rate
70–90%
Funding speed
Same day
Scales with
Invoice volume
Qualifies on
Customer credit
What Is Invoice Factoring?
Invoice factoring is one of the products under the revenue-based financing umbrella — a category where repayment is tied to what you earn or are owed, not a fixed monthly bill. Specifically, factoring is a financing arrangement where you sell your outstanding accounts receivable — unpaid invoices — to a third party (the factor) at a slight discount. The factor advances you 70–90% of the invoice value immediately, then collects payment directly from your customer when the invoice comes due. Once collected, you receive the remaining reserve minus the factoring fee.
Unlike a line of credit or merchant cash advance, factoring is not a loan. You are selling an asset — your receivables — so no debt is added to your balance sheet. And because the factor's risk is tied to your customers' ability to pay (not yours), businesses with limited or imperfect credit can qualify as long as their customers are creditworthy.
Factoring works on a continuous cycle: deliver work, submit invoices, receive advances, repeat. As your business grows and invoice volume increases, your available capital grows with it — no reapplying, no fixed caps.
How Invoice Factoring Works
A continuous cycle that converts accounts receivable into working capital on demand.
Deliver work and issue your invoice
Complete work or ship product and issue invoices to your commercial or government customers with standard net payment terms (30–90 days).
Submit invoices to the factor
Submit invoices to the factoring company. They verify the invoices and check your customers' creditworthiness — this is their underwriting, not yours.
Receive 70–90% within 24 hours
The factor advances 70–90% of the invoice value to your account, often the same business day. The remaining reserve is held until your customer pays.
Factor collects; you receive the reserve
When your customer pays the factor, you receive the remaining reserve minus the factoring fee. Then the cycle repeats with your next invoices.
Types of Invoice Factoring
Different structures to match your risk tolerance and customer relationships.
Recourse Factoring
The most common structure. You remain liable if a customer fails to pay — if an invoice goes unpaid beyond ~90–120 days, you buy it back or replace it. Lower rates in exchange for retaining some credit risk.
Non-Recourse Factoring
The factor absorbs the loss if a customer becomes insolvent or files bankruptcy. Protection is typically limited to insolvency — not disputes or slow payment. Higher rates reflect the factor's additional risk.
Spot Factoring
Factor individual invoices on a case-by-case basis rather than establishing an ongoing facility. No minimum volume requirement and no long-term commitment.
Whole Ledger Factoring
All qualifying invoices are factored, typically at preferential rates due to volume. The factor manages your entire accounts receivable function.
Real-World Example
Staffing agency — $100,000 in outstanding invoices, 45-day payment terms, $20,000/week payroll
Without Factoring
- Must wait 45 days for client payments
- Weekly payroll creates cash flow pressure
- Forced to decline new contracts
- Risk of late vendor payments
- Growth stalls waiting on collections
With Factoring
- $85,000 advance (85%) within 24 hours
- Payroll funded consistently and on time
- Capacity to hire and take on new clients
- Vendors paid promptly — better terms
- Revenue growth no longer cash-constrained
The transaction
Business impact
How Invoice Factoring Compares
Factoring is unique because it qualifies on your customers' creditworthiness — not yours. Here's how it stacks up against other business funding options.
| Invoice Factoring | MCA | Line of Credit | Term Loan | |
|---|---|---|---|---|
| Qualification focus | Your customers' creditworthiness | Monthly revenue | Business credit + score | Credit + collateral + history |
| Typical cost | 2–5% per 30 days | Factor rate 1.10–1.49× | 8–25% APR | 6–25% APR |
| Funding structure | 70–90% advance, reserve on collection | Lump sum, daily ACH repayment | Revolving draw up to limit | Lump sum at closing |
| Funding speed | Same day (after initial setup) | 24–48 hours | 1–5 days | 3–10 days |
| Min. credit score | 500+ (customer credit matters more) | 500+ | 620+ | 650+ |
| Scales with revenue | Yes — grows with invoice volume | No — fixed advance | No — fixed credit limit | No — fixed loan amount |
| Balance sheet impact | None — receivables are sold | Liability added | Liability added | Liability added |
| Customer notification | Usually yes — they pay factor directly | No | No | No |
| Collections | Factor handles it | Automatic ACH | You manage | You manage |
| Best use case | B2B with outstanding invoices | Revenue-based fast need | Ongoing working capital | One-time capital investment |
Benefits & Considerations
Understanding both sides helps you decide if factoring is the right fit.
Benefits
- Immediate cash flow — convert invoices to working capital within 24 hours
- Qualification based primarily on customer credit, not yours
- Scales automatically with your sales volume — no reapplying
- No debt added to your balance sheet (receivables are sold, not borrowed against)
- Factor handles credit checking, invoice verification, and collections
- Accessible to startups and businesses with limited credit history
Considerations
- Higher cost than traditional bank financing (1–5% per invoice)
- Customers are typically notified and directed to pay the factor
- Requires creditworthy B2B or B2G customers — B2C invoices rarely qualify
- Only works for completed, delivered work — not future receivables
- UCC-1 lien on receivables is visible to other lenders
- Factor controls collections — less control over customer communication
Industry Applications
How different B2B industries use invoice factoring to solve cash flow gaps.
Staffing & Temp Agencies
Bridge the gap between weekly payroll for placed workers and 30–60 day client payment terms. Factoring lets agencies fund payroll consistently and take on new client accounts without cash flow risk.
See revenue-based optionsTransportation & Logistics
Trucking companies and freight brokers use factoring to cover fuel, maintenance, and driver pay while waiting for shipper and broker payments — often net-30 to net-60.
Compare with MCAManufacturing
Convert large purchase orders into immediate working capital for raw materials and payroll. Factoring lets manufacturers take on bigger orders without waiting for lengthy net terms.
Also see PO financingWholesale Distribution
Replenish inventory quickly after large deliveries to retailers without waiting 30–60 days for payment. Factoring keeps inventory moving and supplier relationships healthy.
Or explore a line of creditEligibility Requirements
Business Qualifications
- B2B or B2G business model with commercial or government customers
- Invoices for completed, delivered work or shipped products
- Creditworthy customers with good payment histories
- Clean receivables (no existing liens on AR)
- Minimum $10,000+/month in invoices
Required Documents
- Business formation documents (Articles of Incorporation / LLC Agreement)
- Accounts receivable aging report
- Customer list with contact information
- Sample invoices and contracts
- Recent financial statements or tax returns
Tell us your average monthly invoice volume and customer payment terms — we'll match you to the right factoring structure.
Frequently Asked Questions
Free Tools to Help You Prepare
Run the numbers before you apply.
Factoring Rates Guide
Benchmark invoice factoring rates by industry and understand the full fee structure.
MCA vs. Factoring
Compare cost, speed, and repayment structure between factoring and a merchant cash advance.
Cash Conversion Calculator
Measure how long cash is tied up in your receivables cycle and how factoring closes the gap.
Working Capital Tool
Calculate your working capital gap and see how invoice factoring can fill it.
Ready to Stop Waiting on Your Customers?
No hard credit pull. Tell us your invoice volume and customer payment terms — we'll find you the right factoring structure and rate.