Invoice factoring is a funding approach where a business receives an advance on eligible invoices instead of waiting for customers to pay on net terms. It’s commonly used by B2B companies with strong invoicing activity especially those with longer payment cycles. Qualification often focuses more on invoice quality and customer creditworthiness than on the business’s own credit profile.
Invoice factoring is a form of accounts receivable financing. Instead of borrowing a loan, you sell eligible invoices to a factoring provider at a discount. In return, you receive an advance quickly and the remainder (minus fees) after your customer pays depending on the structure.
Invoice factoring is different from a traditional loan: availability often scales with your invoicing volume, and underwriting commonly evaluates your customers’ payment reliability.
Invoices are usually for completed, verified B2B work delivered on net terms.
The factoring provider reviews invoice eligibility and the customer’s payment profile.
You receive a percentage of the invoice value upfront (advance rate varies).
When the invoice is paid, you receive the remaining amount after factoring fees and any reserves.