Invoice factoring
Get paid on your invoices without waiting 30, 60 or 90 days.
Factoring turns unpaid B2B invoices into working capital. A factoring company advances most of the invoice value now and pays the rest, minus its fee, when your customer pays. Funding options for eligible ITIN holders and foreign-national business owners. Requirements vary by funder and product.
- Based on
- Your customers’ credit
- Structure
- Advance + reserve
- Fits
- B2B & government invoices
How it works
Advance, reserve, rebate
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Step 1: Invoice your customer
You deliver the work and issue an invoice with payment terms, as usual.
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Step 2: Receive the advance
The factor verifies the invoice and advances a percentage of its face value, often within days.
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Step 3: Customer pays the factor
Your customer pays the invoice to the factor according to its normal terms.
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Step 4: Reserve is released
The factor deducts its fee from the reserve and sends you the remaining rebate.
Worked example
$100,000 invoice with an 85% advance and a 2% fee
The reserve is the part of the invoice held back until your customer pays.
- Invoice face value
- $100,000
- Advance paid to you (85%)
- $85,000
- Reserve held by the factor (15%)
- $15,000
- Factoring fee (2%) Deducted from the reserve
- − $2,000
- Reserve returned (rebate)
- $13,000
- Total received $85,000 advance + $13,000 rebate
- $98,000
Illustrative arithmetic only, not an offer. Fees often increase the longer an invoice stays unpaid, and some agreements add other charges.
Who carries the risk
Recourse vs. non-recourse factoring
| Feature | Recourse | Non-recourse |
|---|---|---|
| If the customer does not pay | You buy back the invoice or replace it with another one. | The factor absorbs the loss — but only for the risks the contract defines, usually customer insolvency. |
| Cost | Usually lower fees. | Usually higher fees for the added protection. |
| What it does not cover | Recourse puts non-payment risk on you. | Typically does not cover disputes, short payments, returns or quality complaints. |
Read the fine print
Minimum fees and other terms to check
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Minimum volume or minimum fee
Some agreements charge a monthly minimum even if you factor fewer invoices than expected.
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Fee tiers by days outstanding
A fee quoted per 30 days can double if the customer pays in 60.
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Term and termination
Check the contract length, notice period and any early-termination fee.
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Spot vs. whole-ledger
Spot factoring lets you choose invoices; whole-ledger agreements may require all of them.
Who it fits
Businesses that invoice other businesses
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B2B companies
Staffing, logistics, wholesale, manufacturing and services firms with creditworthy commercial customers.
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Government contractors
Vendors to federal, state or local agencies waiting on slower public-sector payment cycles.
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Medical receivables
Practices and providers with insurance claims awaiting reimbursement, through specialized medical factors.
Factoring is generally not designed for consumer (B2C) sales, cash sales or invoices for work not yet completed.
Invoice factoring calculator
Adjust the inputs to see your advance, reserve, fee and estimated total proceeds.
Invoice
Factor terms
Usually the day your customer pays, or a few days later.
Illustrative estimates only — not an offer or commitment to fund.
Invoice factoring FAQ
Is invoice factoring a loan?
Factoring is usually structured as a sale of invoices rather than a loan. The factor relies mainly on your customer’s ability to pay, not only on your own credit.
Will my customers know I am factoring?
In most factoring arrangements, customers are notified to pay the factor directly. Some providers offer non-notification options, typically with stricter requirements.
Can I factor invoices if I have an ITIN?
Funding options exist for eligible ITIN holders and foreign-national business owners with a US business. Requirements vary by funder and product.
What is the difference between the advance and the rebate?
The advance is paid when the invoice is verified. The rebate is the reserve returned to you after your customer pays and the factor deducts its fee.
Does non-recourse factoring protect me from all non-payment?
No. It usually covers only defined credit events, such as customer insolvency. Disputes, short payments and returns typically remain your responsibility.
How is factoring different from a merchant cash advance?
Factoring advances against specific invoices and is repaid when your customer pays. An MCA buys a share of future sales or deposits and is remitted daily or weekly.
Waiting on large invoices?
Tell us about your customers and payment terms. We will help you understand whether factoring fits.