Invoice Factoring for B2B Businesses
Invoice factoring is the sale of your unpaid business-to-business invoices to a factoring company in exchange for an advance, usually 80% to 90% of the invoice value.
It fits B2B and B2G businesses with creditworthy customers on 30 to 90 day terms that need cash flow before invoices are paid.
Invoice Factoring quick facts
These are the typical terms for invoice factoring. Your actual terms depend on underwriting.
| Typical amount | $10,000 to $5,000,000+ in monthly invoices |
|---|---|
| Typical term | Ongoing; each invoice settles when your customer pays |
| Typical funding speed | Setup typically 3 to 10 business days, then 1 to 2 days per invoice |
| Typical minimum requirements | B2B or government invoices, creditworthy customers, clean receivables |
| Cost structure | Factoring fee, typically 1% to 5% per 30 days |
Invoice Factoring: good fit or not?
This option works well for some situations and is a poor match for others.
Good fit
- Staffing, trucking, manufacturing, wholesale, and government contractors
- Fast-growing businesses whose customers pay slowly
- Businesses whose own credit is limited but whose customers are strong
Not a good fit
- Businesses that sell to consumers
- Invoices with disputes, offsets, or progress billing (may be limited)
- Very small or infrequent invoices
Documents usually needed
Having these ready typically speeds up review. A funder may request additional items.
- Completed application
- Accounts receivable aging report
- Sample invoices and customer list
- Most recent 3 months of business bank statements
- Entity documents and driver license for each owner
Invoice Factoring: how it works
The process typically follows 4 steps from first conversation to funding.
Submit receivables
Share your aging report and customer list.
Review terms
We compare advance rates, fees, and recourse terms.
Verify invoices
The factor verifies invoices and sets up your account.
Get advanced
Receive an advance, then the balance minus fees when your customer pays.
Invoice Factoring vs. Working Capital
The main difference comes down to structure, cost, and timing. Here is how they typically compare.
| Feature | Invoice Factoring | Working Capital |
|---|---|---|
| Based on | Your customers paying invoices | Your future sales and deposits |
| Payments | Customer pays the factor | Daily or weekly remittance from your account |
| Scales with growth | Yes, more invoices means more funding | Limited to approved amount |
| Best for | B2B businesses with slow-paying customers | Businesses with steady deposits |
Typical characteristics. Terms vary by funder and file.
Invoice Factoring FAQs
Will my customers know I am factoring?
In most factoring arrangements, customers are notified to send payment to the factor. Some funders offer non-notification options for qualified businesses.
What is the difference between recourse and non-recourse factoring?
With recourse factoring, you must buy back invoices your customer does not pay. Non-recourse factoring shifts some credit risk to the factor, usually at a higher fee and only for specific situations such as customer insolvency.
Is invoice factoring a loan?
Factoring is typically structured as a sale of receivables, not a loan. Some funders offer accounts receivable lines of credit that work like a loan instead.
Does my credit matter?
Your customers credit usually matters more than yours, though the factor will still review your business and ownership.
Am I required to factor all of my invoices?
It depends on the agreement. Some factors require full-ledger factoring and others allow spot factoring of selected invoices.