Invoice Factoring vs. Invoice Financing

Factoring sells your unpaid invoices to a factor at a discount (they collect from your customer); invoice financing borrows against the invoices while you keep collecting. Both turn receivables into cash now for B2B businesses waiting 30-90 days to be paid.

Why it matters

Slow-paying customers can strangle a healthy business. These tools price that gap - but at annualized costs that can quietly rival MCAs if invoices age badly.

Key facts

• Factors typically advance 80-90% of invoice value, releasing the remainder minus fees when the customer pays.
• Recourse factoring leaves the risk of a non-paying customer with you; non-recourse shifts it to the factor, for a higher fee.
• Factoring fees of 1-3% per 30 days annualize into double digits - quote the all-in cost, not the headline rate.
• Your customers may be notified and pay the factor directly - that is normal, but choose a factor whose collections style you can stand behind.

In practice

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