Invoice Financing & Factoring

The short answer: Invoice financing lets you borrow against your outstanding invoices, while factoring means selling those invoices to a third party (a factor) at a discount. Both turn unpaid B2B invoices into immediate cash without waiting for your customers to pay.

Qualification

Approval hinges mainly on the creditworthiness of your customers — the ones who owe the invoices — rather than on your own credit. That makes invoice financing accessible for newer or lower-credit businesses with reliable commercial clients.

Speed

Fast. Once a relationship is set up, individual invoices can often be funded within days of being issued.

Repayment structure

There's no fixed repayment schedule from you. With financing, you repay the advance when the invoice pays; with factoring, the factor collects directly from your customer. The invoice itself settles the obligation.

Cost structure

You pay a fee or a discount on the invoice, which generally grows the longer the invoice takes to pay. It's not interest in the traditional sense, and there's no standard rate — cost depends on the customer's credit, the invoice size, and the funder.

Appropriate use cases

• Businesses with strong B2B customers that pay slowly (30–60+ days).
• Smoothing cash flow without taking on fixed debt payments.
• Funding growth when receivables are tied up but customers are reliable.

Potential disadvantages

With factoring, your customers may interact directly with the factor, which some owners prefer to avoid. Fees can add up on slow payers, and it only helps if you have invoices to advance against — it's not a fit for businesses paid mostly at point of sale. For broader short-term needs, see working capital financing and lines of credit, or the full business funding guide.