What is invoice factoring in simple terms?
Invoice factoring lets a business convert unpaid invoices into immediate cash by selling them to a factoring company at a discount. The factor advances most of the invoice amount upfront and collects payment from your customer later.
How much does invoice factoring cost?
Costs vary by industry, customer credit, and terms. Many established firms see 1%–3.5% for the first 30 days, plus incremental fees if invoices age longer. Advance rates are often 80%–90%.
What is the difference between recourse and non-recourse?
In recourse factoring, you may need to buy back or replace an unpaid invoice. In non-recourse, the factor assumes certain credit risks—often only if the customer becomes insolvent. Dispute-related nonpayment is typically excluded, so read terms carefully.
Will my customers know I’m factoring?
Usually yes. Many agreements include a notice of assignment directing customers to pay the factor. Non-notification structures exist but may be more limited or priced differently.
Can startups use invoice factoring?
If a startup issues B2B/B2G invoices to creditworthy customers and meets provider requirements, it may qualify. Providers still review invoice quality, documentation, and customer credit.
How fast can funding happen?
After underwriting, initial funding can occur in 5–10 business days for organized applicants. Once set up, advances on approved invoices often arrive within 24–72 hours.
Is invoice factoring a loan?
No. Factoring is generally a sale of receivables. Instead of repaying a loan, you receive advances and the factor collects invoice payments from your customers.
