What is invoice factoring?
Invoice factoring is the sale of your outstanding invoices (accounts receivable) to a financing company at a slight discount. You receive immediate cash — typically 80–95% of the invoice value — and the factoring company collects the invoice from your customer directly. It is not a loan; there is no debt on your balance sheet.
How is factoring different from a business loan?
With a loan, you borrow money and repay it with interest over time. With factoring, you sell an asset (your invoices) for immediate cash. Factoring does not create debt, does not require collateral beyond the invoices themselves, and the approval is based on your customers' creditworthiness — not yours.
What industries use invoice factoring most?
Factoring is most common in construction, transportation, staffing, manufacturing, and B2B services — any industry where businesses invoice other businesses on net-30, net-60, or net-90 terms. It solves the specific problem of waiting weeks or months for payment while needing cash today.
How much of my invoice do I receive upfront?
Typically 80–95% of the invoice face value. The remaining percentage (called the reserve) is held by the factoring company and released to you — minus their fee — after your customer pays. Total factoring fees typically range from 1–5% of the invoice value depending on volume and customer creditworthiness.
Does my customer know I am factoring their invoice?
In notification factoring (the most common type), yes — your customer is notified to remit payment to the factoring company. In non-notification or confidential factoring, the arrangement is not disclosed. We can discuss which structure works best for your client relationships.
What is the minimum invoice amount to factor?
Most factoring programs work with invoices of $1,000 or more. Factoring is most cost-effective when invoice volumes are substantial — many businesses factor $25,000 or more per month in receivables.
Can a startup factor invoices?
Yes. Factoring is one of the few financing options available to early-stage businesses because approval is based on your customers' ability to pay, not your business history. If you have creditworthy business customers and valid invoices, you may qualify regardless of how long you have been in business.
How fast do I receive funds after submitting an invoice?
After initial setup (which takes 1–3 business days), most invoices can be funded within 24 hours of submission. Repeat invoices to established customers fund the fastest.
What happens if my customer does not pay?
This depends on whether your factoring agreement is recourse or non-recourse. In recourse factoring, you are responsible if your customer defaults. In non-recourse factoring, the factoring company absorbs the loss for qualified non-payments (typically insolvency). Non-recourse arrangements carry higher fees.
Can I factor invoices from government contracts?
Yes. Government invoices are often among the most factorable because federal, state, and municipal agencies are very reliable payers. Assignment of Claims Act compliance is required for federal receivables — we work with lenders experienced in government contract factoring.