The Core Difference
Invoice Factoring
You sell your invoices to a factoring company at a discount. The factor takes ownership of the receivables and collects payment directly from your clients. You receive 80–90% upfront, with the remainder (minus fees) paid when your client pays.
Invoice Financing
You use your invoices as collateral for a loan or line of credit. You retain ownership of the invoices and continue collecting from your clients. You repay the advance plus fees when your clients pay.
Side-by-Side Comparison
| Factor | Invoice Factoring | Invoice Financing |
|---|---|---|
| Structure | Sale of receivables | Loan secured by invoices |
| Advance Rate | 80–90% of invoice value | 80–90% of invoice value |
| Cost | 1–5% per 30 days | 1–3% per 30 days |
| Collections | Factor collects from clients | You collect from clients |
| Client Notification | Yes — clients pay factor directly | No — confidential |
| Credit Check | Based on client credit | Based on your credit |
| Balance Sheet | Off-balance sheet | Appears as liability |
| Best For | Businesses that want to outsource AR | Businesses that want to maintain client relationships |
How Invoice Factoring Works: Step by Step
Submit Invoices
You submit outstanding invoices (typically net-30 to net-90) to the factoring company for review.
Verification
The factor verifies the invoices with your clients and assesses their creditworthiness.
Advance
You receive 80–90% of the invoice value, typically within 24–48 hours.
Collection
The factor collects payment directly from your clients when invoices come due.
Reserve Release
Once your client pays, the factor releases the remaining 10–20% minus their fee.
Who Should Use Invoice Factoring?
Invoice factoring is ideal for B2B businesses that have strong clients but face cash flow gaps due to slow payment terms. It works best when:
Unlock Cash from Your Outstanding Invoices
Our brokers will match you with the right invoice factoring or financing solution for your business — at no cost to you.