How It Works
Factoring, Explained.
Invoice factoring converts revenue you've already earned into working capital. It is structured as the purchase of receivables rather than a traditional term loan, and understanding that difference is the first step to using it well.
Factoring is not structured like a term loan.
A purchase, not a term loan.
Factoring is structured as the purchase of receivables rather than a traditional term loan. Confirm the accounting treatment of any facility with your accountant.
No interest, no fixed loan payments.
You pay a factoring fee on the invoices you choose to advance, rather than interest on a borrowed balance.
Qualification is different.
Factoring underwriting focuses heavily on the quality of your receivables and the creditworthiness of your customers. Your business history, liens and other underwriting factors can still matter.
The Detailed Process
Step 1
Consultation & Application
We start with a short conversation to understand your business, customers, invoicing cadence, and cash flow goals. Then we walk you through a straightforward application focused primarily on your receivables and customer base.
Step 2
Account Setup & Invoice Submission
Once approved, we open a reserve account for your business. Advance rates are typically 80 to 90% of eligible invoice value, depending on the industry, customer credit and facility terms, and certain freight receivables may qualify for advances up to 95%. The remainder is held in reserve until your customer pays, at which point it's released to you less our fee.
Step 3
Funding & Collection
Once approved, eligible invoices can typically be funded within 24 to 48 hours. We handle the professional, respectful follow-up on payment, so you can focus on running your business, not chasing checks.
Factoring vs. Traditional Lending
Two very different tools for two very different jobs.
| Factor | Invoice Factoring | Traditional Loan |
|---|---|---|
| Qualification | Focused on receivable quality and customer credit, with other factors still relevant | Based on your business credit & history |
| Pricing | A fee per period on advanced invoices | Fixed interest rate + fees |
| Speed to funding | Once approved, typically 24 to 48 hours on eligible invoices | Weeks to months |
| Structure | Purchase of receivables | Borrowing recorded as a liability |
| Scalability | Generally tied to eligible receivables | Fixed limit; requires re-underwriting |
| Receivables management | Included, we handle collections | Not included |
Factoring FAQ
Straight answers to the questions we hear most.
Below is how the mechanics actually work: advance rates, reserves, fees, and timelines.
A Bridge, Not a Destination
We help you graduate to bank financing.
For many of our clients, factoring is a stepping stone. As your business stabilizes and grows, we work alongside you, and often directly with your future banker, to help you transition to conventional bank credit when the time is right.