{"id":1511,"date":"2026-03-04T21:37:56","date_gmt":"2026-03-04T21:37:56","guid":{"rendered":"https:\/\/otv.zbj.mybluehost.me\/?page_id=1511"},"modified":"2026-04-21T20:59:35","modified_gmt":"2026-04-21T19:59:35","slug":"factoring-receivables","status":"publish","type":"page","link":"https:\/\/signetcapitalgroup.com\/staging\/8365\/funding-programs\/factoring-receivables\/","title":{"rendered":"Invoice Factoring"},"content":{"rendered":"\t\t
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Home<\/a>  \u203a  Funding Programs<\/a>  \u203a  Invoice Factoring<\/div>\t\t\t\t<\/div>\n\t\t\t\t
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Invoice Factoring<\/h1>\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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Invoice Factoring is the selling of accounts receivables to free up cash flow. When Invoice Factoring, the business will receive an advance that\u2019s typically 80% of the invoice amount at the point of purchase. Once the invoice is collected, the business owner gets the remaining 20% less a fee.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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What Is Invoice Factoring?<\/h2>\t\t\t\t<\/div>\n\t\t\t\t
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Invoice Factoring is a way to free up cash flow that\u2019s held up in your unpaid invoices. Typically, the company will collect the payments on the business\u2019s behalf.<\/p>

We\u2019re going to go over using Invoice Factoring to fund your small business in detail in this guide. We break down everything you need to know about this type of small business loan so that you can decide whether or not it\u2019s the right move for your business.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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The Math Behind Accounts Invoice Factoring<\/h2>\t\t\t\t<\/div>\n\t\t\t\t
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Let\u2019s look more closely at how accounts invoice factoring works. After all, you want to be 100% comfortable with the process and be aware of how it will work for your business.<\/p>

Invoice factoring companies will buy your receivables for 50% to 90% of the total invoice value. Then, your clients will pay their invoices, in full, directly to the factoring company.<\/p>

Lenders will typically take a processing fee, usually around 3%, on the invoice amount. They\u2019ll also charge a \u201cfactor fee\u201d each week until the invoice is paid, usually around an additional 1%.<\/p>

Note that some lenders offer \u201cnon-recourse factoring,\u201d meaning that they assume the credit risk of non-payment. Other lenders reserve the right to \u201crecourse\u201d on bad debt, meaning if your client does not pay, they will ask you to repurchase the invoice. The lines can get a bit blurry here, so make sure to check the fine print.<\/p>

Example of Accounts Invoice Factoring:<\/strong><\/p>

To get a better picture of how accounts invoice factoring works, here\u2019s a real-world example of a factoring transaction:<\/p>

Say you have $200,000 on an outstanding invoice with 30-day terms. If you\u2019re like any other small business owner, you\u2019re probably too busy to collect your outstanding invoices, but you also can\u2019t afford to get behind on your cash flow.<\/p>

To take your unpaid invoice off your hands, you approach an accounts invoice factoring company. The factoring company buys your outstanding invoice for 85% of the invoice value and holds the remaining 15%, meaning you\u2019ll see $170,000 in your bank account while the lender keeps $30,000.<\/p>

Right off the bat, the lender charges you a 3% processing fee, or $6,000. It takes two weeks for your clients to pay up, so you end up paying a 2% factor fee\u2014or $4,000. The lender keeps $10,000 of the $30,000 reserve, and you\u2019ll get $20,000 back.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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Advantages and Disadvantages of Invoice Factoring<\/h2>\t\t\t\t<\/div>\n\t\t\t\t
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The Advantages<\/h3>\t\t\t\t<\/div>\n\t\t\t\t
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Invoice factoring is a great option for some companies, but it isn\u2019t always the right solution for your small business.<\/p>

Before you commit to a factoring receivable agreement, be sure to weigh the pros and cons of invoice factoring.<\/p>

Accounts receivable financing will have different benefits for different companies, but in general, here are the primary advantages:<\/p>