Both help B2B businesses manage the gap between service delivery and client payment. Factoring converts invoices immediately. A line of credit provides flexible draws. Here's when each wins.
Quick answer · Last verified: September 16, 2026
Invoice factoring wins for B2B businesses with strong receivables but weak or short credit: total fees typically run 1–5% of invoice value (a 3% fee on $100,000 collected in 45 days is roughly 24% annualized). A business line of credit wins for strong-credit operators with recurring needs: $10K–$500K limits, APRs from about 8–25%, interest only on what you draw.
| Criterion | Invoice factoring | Business line of credit |
|---|---|---|
| Typical cost | 1–5% of invoice value in total fees | APR from about 8–25%; interest on the drawn balance |
| Worked example (45 days, $100K) | 3% fee = $3,000, about 24% annualized | 20% APR draw = about $2,466 |
| Amount | Tied to invoice value | $10,000–$500,000 revolving limit |
| Credit weight | Your customers’ credit | Your business and personal credit |
| Speed | Invoices convert immediately once set up | 24–48 hours to approval on many online LOCs |
| Adds debt | No (sale of receivables) | Yes |
Related: Invoice factoring · Business line of credit · Working capital
Invoice factoring and business lines of credit both solve the B2B cash flow timing problem — but through fundamentally different mechanisms. Factoring converts specific invoices to cash immediately without adding debt. A line of credit provides a revolving credit pool you draw and repay as needed. For businesses with strong receivables and credit-challenged or newer operations, factoring often wins. For businesses with strong credit and consistent cash needs, a line of credit may cost less over time.
| Factor | Invoice Factoring | Business Line of Credit |
|---|---|---|
| Mechanism | Sell invoices for immediate cash | Draw from revolving credit pool |
| Cost | 1–5% per invoice | 15–40% APR on drawn balance |
| Approval Based On | Client creditworthiness | Business credit + personal credit |
| Min Credit Score | None (client credit matters) | 600–620+ typically |
| Min Time in Business | 0 months (with invoices) | 6–12 months typically |
| Balance Sheet Impact | Asset sale (not debt) | Liability (debt) |
| Max Amount | Tied to invoice volume | Fixed credit limit |
| Repayment | When client pays factor | Weekly or monthly |
| Client Notification | Usually required | Never (your relationship) |
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