Invoice Factoring
Turn your unpaid invoices into working capital you can use today instead of waiting 30, 60, or 90 days to get paid.
Submit one invoice to see your advance rate, with no obligation to continue.
What is invoice factoring?
Invoice factoring from FundBetter turns money you have already earned into cash you can use now instead of weeks from now. You sell your outstanding invoices to a funding partner and receive most of their value upfront, often up to 90%.
When your customer pays the invoice, you get the remaining balance minus a small factoring fee. Because you're advancing your own earnings rather than borrowing, factoring isn't a loan and adds no debt to your balance sheet.
Benefits of invoice factoring
Get paid now, not in 90 days
Turn unpaid invoices into cash in as little as 24 to 48 hours and stop waiting on slow-paying customers.
No new debt
Factoring advances money you have already earned, so your balance sheet stays clean with no new loan.
Funding that grows with sales
The more you invoice, the more working capital you can unlock to fund growth.
Approval based on your customers
Approval leans on the creditworthiness of the customers who owe you, so newer businesses can still qualify.
How does invoice factoring work?
Getting started is simple: you submit the invoices you want to factor. Once FundBetter approves them, most of the invoice value, typically up to 90%, lands in your account within a day or two, ready to cover payroll, materials, or the next job.
Your customer then pays the invoice as normal. When they do, you receive the remaining balance, minus a small factoring fee. Factor as many invoices as you need, as often as you need.
What invoice factoring costs
With FundBetter, invoice factoring is priced transparently as a discount fee taken out of the invoice, not as an interest rate on a balance, so you can see exactly what the funding costs. The fee is quoted against the face value of the invoice and it accrues for as long as the invoice stays unpaid. A common structure is a rate of roughly 1% to 3% for the first 30 days an invoice is outstanding, then a further increment for each additional period the invoice runs.
On a $50,000 invoice with a 90% advance, you receive $45,000 within a day or two. The remaining $5,000 is held as a reserve. If your customer pays on day 28 and the rate is 2%, the fee is $1,000 and you receive $4,000 of reserve back. If the same customer pays on day 45, a second period has started and the total fee rises.
A high advance with a high fee can cost more overall than a lower advance with a tighter rate, because the advance only changes how much cash arrives on day one. The fee is what you actually pay, so make it the number you compare. Ask for the all-in cost on a sample invoice at 30, 60, and 90 days rather than comparing headline rates.
Several things push your factoring rate up or down, and a few of them are in your control. Customers who pay predictably and have strong commercial credit pull the rate down, because the funding partner is taking less risk on collection. Larger invoice volume and longer commitments also help. Rates run higher when your invoice ledger is concentrated in one or two customers, when average invoice size is small, when payment terms stretch past 60 days, or when your industry has a history of disputes and partial payments. Invoices from construction businesses and staffing firms, for instance, are priced differently from clean product deliveries because of retainage and back-charges.
Watch for costs that sit outside the headline rate. Some programs add an application or setup fee, a wire or ACH charge per advance, a monthly minimum volume fee, or a lockbox administration charge. A minimum volume fee matters most if you plan to factor occasionally rather than continuously, because you can end up paying for capacity you don't use.
Invoice factoring vs. invoice financing
Both products turn the receivables you're owed into working capital you can use now, so cash keeps moving while customers take their time to pay. The difference decides who talks to your customer and how the cost is charged. Neither replaces long-term business loans when the need is a durable asset rather than a timing gap.
| How they compare | Invoice factoring | Invoice financing |
|---|---|---|
| Who owns the invoice | You sell the invoice. The funding partner owns the receivable. | You keep the invoice. It is pledged as collateral for an advance. |
| Who collects payment | The funding partner collects directly from your customer. | You collect as normal and then repay the advance. |
| How cost is charged | A discount fee on the invoice face value, accruing per 30 days outstanding. | Interest on the drawn amount, often with a servicing or facility fee. |
| Customer notification | Usually yes. Your customer is told where to send payment. | Usually no. Your customer sees no change. |
| Credit focus | Weighted toward the credit of the customers who owe you. | Weighted more toward your own business and its records. |
| Who it suits | Businesses that want the collections work handled and can accept customer contact, including manufacturing businesses shipping on open terms. | Businesses with a solid collections process that want the arrangement kept private. |
Pros and cons of invoice factoring
Factoring is built for one job, and when that's not the job you have, FundBetter will say so rather than sell you the wrong product. It solves a timing problem by turning money you have already earned into cash sooner. It doesn't solve a margin problem or a demand problem.
Good reasons to use invoice factoring
- Your customers are creditworthy but slow, and the gap between delivery and payment is what is squeezing you.
- Payroll or supplier bills fall due weeks before your receivables land.
- You have won a larger contract with net 60 or net 90 terms, the norm for trucking companies hauling for large shippers, and need cash to actually deliver on it.
- Your business is young or your own credit file is thin, which is common for consulting firms, but the companies you invoice are established.
- You want a facility that grows with the invoice ledger rather than a fixed limit, which is the usual reason wholesale distributors factor while adding accounts.
- You would rather hand collections work to someone else than keep chasing payment.
Poor reasons to use invoice factoring
- Your margins are thin. A factoring fee taken from every invoice can erase the profit on low-margin work.
- You invoice consumers rather than businesses. Factoring is built for B2B receivables, and a merchant cash advance suits card-paying customers better.
- You need funding for something no invoice covers, such as a build-out or a machine, where equipment financing is the better fit.
- Your invoices are frequently disputed or subject to milestones and retainage, which complicates advances.
- The underlying problem is that you are not selling enough. Factoring accelerates revenue, it does not create it.
- Your customer relationships would suffer if a third party contacted them about payment.
Invoice factoring terms to understand
These terms decide what factoring actually costs you and how much control you keep, and reading them closely is what keeps the deal working in your favor. Read them in the agreement rather than in the quote, not after you sign.
Recourse factoring
Recourse factoring keeps the lowest rate in reach, because you remain responsible if your customer never pays. After an agreed period, commonly 90 days, the funding partner can charge the invoice back to you or offset it against a future advance. You keep the credit risk, so you pay less for the funding.
Non-recourse factoring
Non-recourse factoring buys you protection by shifting the credit risk to the funding partner, though that protection is narrower than it sounds. It typically covers only customer insolvency, not slow payment, disputes, or your own delivery failures. Expect a higher rate and read the exact list of covered events.
The factoring reserve
The reserve is the portion of the invoice held back, so a 90% advance leaves a 10% reserve waiting for you. It's released once your customer settles, minus the fee. Because it's your money, ask how quickly reserves are released, as that timing shapes your cash flow.
Notified vs. non-notified factoring
Most factoring is notified, meaning your customer receives a notice of assignment telling them to remit payment to a new account. Non-notified arrangements keep the setup quiet but require stronger financials from you. If customer perception matters to you, raise it before terms are drawn up.
Spot factoring and whole-ledger factoring
Spot factoring lets you sell a single invoice whenever you need cash, with no long commitment. Whole-ledger factoring commits your full receivables book for a term and usually prices better. Spot costs more per invoice but avoids minimum volume fees, so it fits occasional or seasonal use.
Factoring concentration limits
Concentration limits cap how much of your advanced total can come from any one customer, often around 30% to 40%. If one client accounts for most of your revenue, part of that ledger may sit outside the facility. Ask where the limit sits so you know the cash you can actually count on.
Best ways to use invoice factoring
Factoring covers one gap: work delivered, invoice sent, cash still weeks away.
Who qualifies for invoice factoring?
Your customers' credit carries most of the weight here, so newer businesses often qualify when a loan is out of reach.
Check if you qualifyFrequently Asked Questions
What is the difference between recourse and non-recourse invoice factoring?
With recourse factoring, you buy back or repay the invoice if your customer never pays. With non-recourse factoring, the funding partner absorbs that loss, but usually only when the customer becomes insolvent. Disputes, short pays, and slow payment normally stay with you either way. Recourse costs less because you keep the credit risk.
What happens if my customer does not pay a factored invoice?
Under a recourse agreement, the invoice is charged back to you after an agreed period, commonly 90 days. That usually means repaying the advance or having it offset against your next one. Under non-recourse, the loss is absorbed only if it falls within the covered events in your agreement, so check that list carefully.
Can I factor a single invoice instead of my whole ledger?
Yes. Spot factoring covers one invoice or one customer at a time, which suits seasonal work or a one-off cash gap. The rate per invoice is usually higher than a whole-ledger arrangement, but you avoid monthly minimum volume fees and you're not committing your entire receivables book for a term.
How does invoice factoring affect my customer relationships?
In a notified arrangement, your customer receives a notice of assignment and remits payment to a new account. Collections are handled by the funding partner. Most commercial customers deal with this routinely. If it would be sensitive with a particular account, say so early, because non-notified arrangements and account-by-account exclusions are sometimes possible.
Which invoices can be factored?
You can factor invoices you have issued to other businesses or to government agencies for work already completed and delivered, as long as they carry clear payment terms and no dispute. Progress bills, invoices subject to retainage, and consumer invoices are harder to advance. Any invoice you have already pledged to another lender can't be factored until that claim is released.
Is invoice factoring cheaper than a business line of credit?
It depends on how fast your customers pay. A factoring fee of a few percent for 30 days is a large annualized cost if the invoice settles quickly, but you only pay it on invoices you actually factor. A line of credit often prices lower. Factoring wins when approval or speed is the constraint.
Other business funding options
Business Lines of Credit
Revolving credit that is not tied to specific invoices or customers.
Learn moreRevenue-Based Financing
Funding sized to total revenue rather than individual receivables.
Learn moreShort-Term Business Loans
A fixed lump sum when you would rather not involve your customers.
Learn moreAccelerate cash flow with invoice factoring
Send over the invoices you want advanced and see your rate. Free to check, with no impact to your credit.