1) What is invoice factoring for small business?
It’s the sale of eligible customer invoices to a factoring company for immediate cash. You receive an advance now and the factor collects from your customer, then releases the reserve minus fees.
2) Is factoring a loan?
No. Factoring is a sale of receivables (an asset). That’s why eligibility often focuses on your customer’s creditworthiness rather than your personal credit score.
3) What are typical factoring rates and advance percentages?
Small businesses often see advance rates of 70–95% and discount rates around 1–5% per 30 days, assessed weekly or monthly. Costs vary by industry, customer quality, and volume.
4) How fast can funding arrive?
After onboarding and invoice verification, funds commonly arrive within 24–48 hours via ACH or wire. First-time setup can take longer due to due diligence.
5) Do I need strong personal credit to qualify for factoring?
Personal credit has some influence, but factors mainly underwrite your customers’ ability and willingness to pay and the quality of your invoices.
6) What’s the difference between recourse and non-recourse factoring?
With recourse, you may need to repurchase or replace unpaid invoices. With non-recourse, the factor assumes certain credit risks (often customer insolvency) but not disputes or performance issues.
7) Will my customers know I’m factoring?
Often yes. Many agreements include a Notice of Assignment that instructs customers to pay the factor directly. Some structures can be more confidential; ask providers how they handle notifications and collections.
