What it is
Factoring (or receivables financing) advances most of an approved invoice now. When your customer pays, you receive the remainder minus fees. Approval leans on your customers' payment history and contract terms, not just your credit score.
Who it fits
- A wholesaler waiting on a retail buyer paying net-60.
- A staffing firm invoicing clients on net-45.
- A manufacturer shipping to distributors on net-30.
What many lenders look for
- Many factors want steady B2B or government invoicing — volume often matters more than FICO.
- Clear invoices, acceptable payment terms, and customers they can underwrite.
- Your contract may restrict assigning invoices; check before you apply.
Pros
- Speed — funding can track invoice approval, not a long credit committee.
- Useful when slow-paying customers drive cash gaps, not weak operations.
Cons
- Fees rise with slower pay; net-90 costs more than net-30.
- Recourse vs. non-recourse changes who eats a short pay or dispute.
- Some customers are notified when invoices are assigned.
Questions to ask any provider
- What is the all-in fee on a 60-day invoice?
- Recourse or non-recourse, and what happens if my customer short-pays?
- Will my customer be notified?
Run the numbers
Illustration only — not a quote or offer.
Factoring fee on one invoice
Fee grows with days outstanding. Annualized cost on advance helps compare to a line of credit — not a perfect apples-to-apples match.
- Advance today
- $21,250
- Estimated fee
- $1,000
- Fee as % of invoice
- 4.00%
- Fee as % of advance
- 4.71%
- Annualized fee on advance (illustrative)
- 28.6%
Compare other options
FAQ
- Is factoring a loan?
- It is the sale or financing of receivables, not a traditional term loan. Structure affects accounting — ask your CPA.