You sell your unpaid invoices at a discount and get most of the cash now. Because the lender is really underwriting your customers, this often works when revenue-based products don't.
You invoice a customer on 30, 60, or 90 day terms. Instead of waiting, you sell that invoice to a factor. They advance you most of the face value — commonly 80–90% — and hold the rest as a reserve. When your customer pays, you get the reserve back minus the factoring fee.
The factor's real risk is whether your customer pays, not whether you do. That flips the underwriting. A young business with weak personal credit but invoices out to a creditworthy customer can often factor when it can't get a term loan or a line.
B2B businesses with real payment terms and a gap between doing the work and getting paid — staffing, trucking, construction subs, manufacturing, professional services. If you sell to consumers, there's nothing to factor.
It's not free money; you're taking a discount on revenue you've already earned. Costs compound if your customers pay slowly — a 3% fee per 30 days on an invoice that takes 90 days to clear is closer to 9%. Some arrangements are notification-based, meaning your customer learns you're factoring, which some owners would rather avoid. And watch for long contracts with minimum monthly volumes.
| Time in business | 3+ months |
| Monthly revenue | $10k+ |
| Credit | Flexible |
| Customer type | B2B only |
| Typical cost | 1–4% per 30 days |
| Speed to funding | 1–7 days |
These are typical floors, not offers. Lenders vary.
Answer four questions and see which funding options fit your business — and the criteria behind each one.