Turn Unpaid Invoices into Immediate Cash. If your business has cash tied up in unpaid invoices, you’re not alone. Many small businesses face a cash flow gap between delivering a product or service and getting paid.
Invoice factoring is one of the fastest ways to turn those outstanding invoices into immediate working capital—without taking on traditional debt. This year, factoring companies have become more competitive, offering same-day funding and flexible terms for industries like trucking, manufacturing, staffing, and B2B services.
Quick Stat: According to the International Factoring Association, U.S. businesses used invoice factoring to fund over $100 billion in receivables in 2024.
What is invoice factoring?
Invoice factoring is a form of financing where a business sells its unpaid invoices to a factoring company at a discount. Instead of waiting 30, 60, or 90 days for payment, you get up to 95% of the invoice value within 24 hours.
The factoring company then collects the payment from your customer directly. Once your client pays, you receive the remaining balance minus the factoring fee.
How It Works—Step by Step
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You deliver goods/services to your customer and issue an invoice.
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You sell the invoice to a factoring company.
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They advance you 80–95% of the invoice amount.
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The factoring company collects payment from your client.
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You get the rest minus the agreed factoring fee.
Recourse vs Non-Recourse Factoring
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Recourse Factoring—You must buy back unpaid invoices if your client doesn’t pay. Lower fees but higher risk.
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Non-Recourse Factoring—The factoring company absorbs the loss if the client fails to pay due to insolvency. Higher fees but safer.
| Feature | Recourse | Non-Recourse |
|---|---|---|
| Risk to Business | High | Low |
| Fees | Lower | Higher |
| Approval Requirements | Easier | Stricter |
Who Should Use Invoice Factoring?
Invoice factoring works best for:
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Small & mid-sized businesses with slow-paying customers.
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Industries with large invoices (e.g., manufacturing, trucking, staffing).
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Businesses with good clients but poor cash flow.
If you’re consistently waiting 30–90 days for payment, factoring can bridge the gap between expenses today and revenues tomorrow.
How Much Does Invoice Factoring Cost?
Factoring fees vary but typically range from 1% to 5% of the invoice amount per month.
Example Calculation:
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Invoice: $50,000
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Advance Rate: 90% ($45,000 upfront)
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Fee: 3% per month
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Client pays after 60 days → Total fee = $3,000
Effective APR: This could be equivalent to 36%+ annually, so compare factoring to other financing options before committing.
For a detailed breakdown of costs, see U.S. Small Business Administration’s guide to financing.
Pros & Cons of Invoice Factoring
| Pros | Cons |
|---|---|
| Fast access to cash (as little as 24 hours) | Higher cost than traditional loans |
| No collateral needed | May require creditworthy customers |
| Easy approval based on client credit, not yours | Customers know a third party is involved |
| Scales with your sales | Risk of customer relationship strain |
Related Reading:
Alternatives to Invoice Factoring
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Invoice Financing (Accounts Receivable Financing)—You keep control of collections.
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Business Line of Credit – Flexible draw and repayment.
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Short-Term Business Loan – Lump sum, fixed repayment schedule.
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Merchant Cash Advance—Based on future card sales.
Best Invoice Factoring Companies
If you need fast access to working capital, these factoring companies are among the best-rated in 2025 for speed, transparency, and competitive rates.
| Company | Best For | Advance Rate | Funding Speed | Notable Features |
|---|---|---|---|---|
| BlueVine | Flexible funding for small businesses | Up to 90% | Same day (with approval) | No long-term contracts, integrates with QuickBooks, easy online application |
| FundThrough | QuickBooks users needing instant uploads | Up to 100% | 1–2 days | Automated invoice uploads, no monthly minimums, works with small and large invoices |
| altLINE | Lower fees for large invoice volumes | Up to 90% | 1–3 days | Bank-owned factoring, competitive rates, transparent fee structure |
| Triumph Business Capital | Trucking and freight factoring | Up to 97% | Same day | Specializes in the transportation industry, fuel advance programs |
| TCI Business Capital | B2B businesses with high invoice volume | Up to 90% | 1 day | Flexible contracts, same-day funding, industry-specific factoring |
Compare factoring fees carefully. Even a 1–2% difference in discount rate can add up to thousands of dollars annually.
How to Apply for Invoice Factoring
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Prepare your invoices—they must be for completed work.
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Gather client payment history—shows reliability.
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Apply online—many companies approve within hours.
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Review the contract carefully—understand the advance rate, fees, and recourse terms.
Author Bio
Casey Frost – Small Business Finance Expert | Factoring & Cash Flow Specialist
Casey helps entrepreneurs navigate funding options from invoice factoring to lines of credit. His insights have been featured in major finance publications and trusted by thousands of small business owners.
Disclaimer
This article is for informational purposes only and does not constitute financial advice. Consult with a qualified financial advisor before making any funding decision. We may earn a commission if you apply through links in this article, but our reviews are independent and unbiased.
