Funding types

Invoice factoring: turn unpaid invoices into cash now

If your business bills other businesses and waits 30, 60 or 90 days to get paid, factoring converts those invoices into cash today. Here is how it works.

Best for: B2B businesses waiting on invoices
Speed: Often days
Credit: Your customers' credit matters more
Repayment: Paid when your customer pays
Collateral: The invoices

With invoice factoring, you sell unpaid invoices to a factoring company. It advances most of the invoice value upfront, collects payment from your customer, then sends you the rest minus its fee. Because the funder is relying on your customers paying, your own credit matters less.

Who uses it

Trucking and logistics companies
Staffing agencies
Manufacturers and wholesalers
Contractors and B2B service firms

Recourse vs. non-recourse

With recourse factoring, you're responsible if a customer doesn't pay. With non-recourse, the factoring company takes on more of that risk, usually for a higher fee. Read what the agreement covers.

Factoring vs. invoice financing

In factoring, the factor usually collects from your customer. In invoice financing, you borrow against invoices and collect yourself. Ask which you're getting.

Questions owners ask

Does invoice factoring add debt?

Factoring is typically a sale of invoices rather than a loan, so it generally doesn't add debt to your balance sheet. Confirm the structure with the provider and your accountant.

Industries that use this most

Each page below covers what that industry borrows for, how many independent businesses of that kind are operating, and what an underwriter looks at in that sector.