What is invoice factoring in simple terms?
Invoice factoring is when a business sells its unpaid B2B or B2G invoices to a factoring company for immediate cash, then the factor collects payment from the customer.
How much does invoice factoring cost?
Typical factoring rates run about 1.25%–4.0% per 30 days, plus possible fees. Actual pricing depends on invoice aging, industry risk, volume, and whether the facility is recourse or non-recourse.
Is factoring a loan?
No. Factoring is generally a sale of receivables. Instead of borrowing, you sell invoices at a discount. Some A/R financing structures operate as secured lines; ask how your specific agreement is structured.
What’s the difference between recourse and non-recourse factoring?
In recourse factoring, your business ultimately takes the loss if the customer doesn’t pay. In non-recourse, the factor assumes certain credit risks (often only insolvency). Always review coverage definitions.
Will my customers know I’m factoring?
Usually yes, via a Notice of Assignment directing payment to the factor. Some larger or bank-led facilities may offer confidential or non-notification options for eligible businesses.
How fast can I get funded?
After onboarding, many companies receive advances within 24–48 hours of submitting eligible invoices. Initial setup typically takes several business days.
Does invoice factoring affect my credit score?
Factoring relies heavily on your customers’ credit and invoice quality. It’s not a traditional loan, but your business credit and performance can still be reviewed during underwriting.
