What is Invoice Financing?
Invoice factoring is the practice of selling unpaid B2B invoices to a factor for 75%–95% of face value within 24–48 hours, then receiving the balance (minus a 0.25%–1% fee per invoice) when the customer pays. As of 2026, pricing typically runs Prime + 1–6%, facility sizes range from $250K to $100MM, and the facility scales automatically with sales. Approval looks at your customers' credit rather than your tax return — which is why it works for growing companies whose financials don't yet tell the full story.
How It Works
Invoice factoring is the sale of unpaid B2B invoices to a third party — called a factor — in exchange for most of the money upfront. The factor advances 75–95% of the invoice's face value within a day or two, then sends the balance, minus a small fee, once your customer pays.
The first thing to understand is that this is not a loan. It is the recurring sale of an asset, which means it does not appear as debt on your balance sheet — a meaningful difference if you have bank covenants to protect or are preparing the business for sale.
The line refills as customers pay, so you can keep drawing against new invoices as you upload them. Customers send payments to a separate bank account in your name, called a lockbox, that the factor sweeps. The only operational change for your customers is a slightly different mailing address, which most accounts payable teams handle routinely.
The biggest advantage for growing companies is the underwriting lens. Factors evaluate the credit of your customers rather than your tax returns or owner's personal credit, which is why factoring often works for businesses that have been declined by a bank. Staffing agencies, manufacturers selling to large buyers, and government subcontractors are typical fits.
As of 2026, advance rates run 75–95%, per-invoice fees range from 0.25–1.5%, and facility sizes scale from $250K to $100MM.
The wrong fit: direct-to-consumer businesses, which have no commercial invoices to sell; construction with heavy retainage and concentrated customers; and businesses with less than about $250K of steady invoices, where the economics get thin for both sides.
Quick Facts
| Facility / Loan Size | Facility sizes from $250K to $100MM, scaling automatically as your sales grow |
|---|---|
| Cost of Capital | Advance rates of 75%–95% on eligible invoices; medical AR runs lower (65–70%) because of insurance discounting |
| Funding Timeline | Funding typically 24–48 hours after invoice upload; full facility setup runs 3–4 weeks |
| Best For |
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Key Features & Benefits
Facility sizes from $250K to $100MM, scaling automatically as your sales grow
Advance rates of 75%–95% on eligible invoices; medical AR runs lower (65–70%) because of insurance discounting
Pricing: factor fees of 0.25%–1.5% per invoice on the discount-rate model; combined-fee structures run Prime + 1–6% on borrowed funds
Not a debt product on your balance sheet — it's a recurring sale of an asset
Self-liquidating revolving line: as customers pay, the line refills like water in a cup
Lockbox or DACA account set up in your name; lender sweeps customer payments directly
Underwritten primarily on the credit of your customers (account debtors), not on owner personal credit
Funding typically 24–48 hours after invoice upload; full facility setup runs 3–4 weeks
Validity guarantee in lieu of personal guarantee on many deals — you're only liable if there's fraud or misrepresentation
Selective or full-turn factoring options — you can choose which invoices to fund or run the whole book
Mid-stream facility raises happen fast (often in days) once the lender knows your account debtors
Distressed-company pricing runs higher (mid-teens to 18%+ all-in); cleaner profiles get below 14%, sometimes 12–13%
Bank-owned factors are more rigid but cheaper; non-bank factors are more flexible and slightly pricier
Invoice Financing - Common Questions
Get answers to the most common questions about invoice financing
See It In Action
Real companies using Invoice Financing to solve their capital challenges
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Other Funding Solutions
Working Capital Loans & Lines of Credit
A working capital loan is short-term, revenue-based financing of $100K to $10M+ that funds in 2 to 10 business days, priced at 1.25%–4% per month. As of 2026, it's the fastest way to cover payroll, inventory, or growth-driven cash gaps when a bank can't move quickly enough — and at the same speed as a merchant cash advance it costs roughly half as much because the payment is monthly rather than a daily extraction from sales.
Learn more about Working Capital Loans & Lines of Credit →Equipment Leasing
& Financing
Equipment leasing and financing covers $100K to $50MM+ of machinery, vehicles, or technology over 3–7 year terms, with advance rates of 70%–85% of liquidation value and pricing of Prime + 3–10%. As of 2026, financing the asset directly is almost always cheaper than drawing on a working-capital line for the same purchase. Sale-leaseback structures let you extract 50%–70% of the equity from equipment you already own without adding a new debt covenant.
Learn more about Equipment Leasing & Financing →Asset-Based Lending
Asset-Based Lending (ABL) is a revolving credit line — typically $250K to $25M, priced at Prime + 1–5% — secured by a combination of accounts receivable (70%–90% advance), inventory (50%–75% advance), equipment, and sometimes real estate. As of 2026, ABL is the standard replacement for a maxed-out bank line when a company has hard assets but doesn't fit a traditional credit box. Most bank ABL desks start at $3–5M minimums, which is why deals below that size usually need an advisor with multiple lender relationships.
Learn more about Asset-Based Lending →