What is accounts receivable financing?
Accounts receivable financing converts unpaid invoices into immediate cash by selling them (factoring) or borrowing against them (invoice discounting/receivables line). It helps businesses bridge cash-flow gaps caused by customer payment terms.
How does invoice factoring differ from invoice discounting?
Factoring involves selling invoices to a factor that often handles collections. Invoice discounting is a confidential loan secured by receivables where the business typically retains collection duties.
How much does accounts receivable financing cost?
Costs vary. Advance rates often range 70%–90%; factoring fees commonly run from under 1% to several percent per invoice term. Effective APR depends on volume, invoice life, and risk—calculate total fees across typical cycles to compare providers.
Who is eligible for AR financing?
Eligibility usually hinges on the creditworthiness of your customers, quality and age of receivables, and the business’s documentation. Lenders focus more on your customers' ability to pay than on your business credit profile alone.
How long does it take to get funded?
Spot factoring or fintech platforms can advance funds within 24–72 hours once underwriting is complete. Lines of credit or bank facilities may take longer (weeks) due to more extensive underwriting.
Is accounts receivable financing recourse or non-recourse?
It depends. Recourse factoring requires the seller to cover unpaid invoices; non-recourse factoring shifts some default risk to the factor but usually at higher cost and with exclusions (e.g., disputes, fraud).
Can startups use accounts receivable financing?
Yes, if they invoice creditworthy customers and have verifiable receivables. Startups without solid invoicing history may find it harder to qualify or face higher fees; spot factoring can be a good entry path.
