Invoice Factoring
Short answer: Invoice factoring is selling your unpaid B2B invoices to a factoring company at a small discount in exchange for immediate cash. The factor advances most of the invoice value now, collects from your customer, then pays you the rest minus its fee.
If slow-paying customers are strangling your cash flow, invoice factoring turns those unpaid invoices into cash within 24–48 hours — without taking on debt. You sell your receivables at a small discount; the factor advances 80–95% now and pays the rest when your customer settles up. Because approval rides on your customers’ credit, factoring works even when your own credit or time in business is thin.
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How Invoice Factoring Works
- You invoice your customer on normal net-30/60/90 terms.
- You sell the invoice to a factoring company.
- You get 80–95% advanced — usually within 24–48 hours.
- The factor collects from your customer when the invoice comes due.
- You receive the rest, minus a 1%–5% factoring fee.
No new loan, no monthly debt payment — you’ve simply gotten paid early.
Advance Rates and Cost
| Invoice amount | Advance (90%) | Factoring fee (3%) | You net |
|---|---|---|---|
| $10,000 | $9,000 | $300 | $9,700 |
| $50,000 | $45,000 | $1,500 | $48,500 |
| $100,000 | $90,000 | $3,000 | $97,000 |
The fee scales with how long your customer takes to pay — faster payment, lower cost.
Factoring vs. Invoice Financing
- Factoring — you sell the invoice; the factor collects. Hands-off, but your customer deals with the factor.
- Invoice financing — you borrow against the invoice and keep collecting yourself. More private, but it’s debt.
Who It’s Built For
B2B businesses on terms — staffing agencies, trucking companies, manufacturers, wholesalers, and service firms. If your customers are creditworthy, factoring can scale with your sales far faster than a fixed loan. Trucking owners in particular lean on it; see business loans for trucking companies.
One Thing to Watch
Know whether you’re signing recourse (you eat the loss if your customer doesn’t pay — cheaper) or non-recourse (the factor absorbs it — pricier) factoring. For a full comparison of factoring against other products, see the 2026 business funding guide, or call (888) 490-3126.
B2B Factoring: Built for Business-to-Business Invoices
Factoring works when your customers are businesses or agencies on payment terms — a GC on pay-when-paid, a corporate account on Net 60, a government office on Net 90 (see government contractor funding). The factor advances 80-90% of the invoice face value the same week, collects from your customer on the due date, and releases the remainder minus the fee. Because approval rides on your customers’ credit, B2B factoring is one of the most accessible products for young companies with strong clients — and the facility grows automatically as you invoice more.
Frequently Asked Questions
What is invoice factoring?
Invoice factoring is selling your unpaid B2B invoices to a factoring company at a small discount in exchange for immediate cash. The factor advances most of the invoice value now, collects from your customer, then pays you the rest minus its fee.
How much of the invoice do I get up front?
Typically 80%–95% within 24–48 hours. When your customer pays, you receive the remaining balance minus the factoring fee, which usually runs 1%–5% of the invoice.
Is invoice factoring a loan?
No. You’re selling an asset — your receivables — not borrowing. That means no new debt on your balance sheet, and approval based largely on your customers’ creditworthiness rather than just yours.
What’s the difference between factoring and invoice financing?
With factoring, you sell the invoice and the factor collects from your customer. With invoice financing, you borrow against the invoice and still collect it yourself. Factoring is more hands-off; financing keeps the customer relationship fully yours.
What is recourse vs. non-recourse factoring?
With recourse factoring (most common and cheaper), you’re responsible if your customer never pays. With non-recourse, the factor absorbs that loss for a higher fee. Know which one you’re signing.
Who qualifies for invoice factoring?
B2B businesses that invoice other companies on net-30/60/90 terms — staffing, trucking, manufacturing, wholesale, and services. Approval leans on your customers’ credit, so even newer businesses with creditworthy clients can qualify.
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Options
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