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What is Invoice factoring?
Invoice factoring is selling unpaid invoices to a finance company at a discount for immediate cash — typically 80–90% upfront, the rest (minus fees) when the client pays. It's expensive money, but for a business waiting 60 days on a big invoice while payroll looms, speed beats price.
In practice
A manufacturer factors a $100,000 invoice: receives $85,000 today, the factor collects the $100,000 in 60 days and remits the remaining $15,000 minus a $3,000 fee.
Avoid the factoring trap
Shorter payment terms and same-day invoicing beat selling invoices at a discount.
Create an invoice — freeFrequently asked questions
How much does factoring cost?
Typically 1–5% of the invoice per month until paid. On a 60-day $100,000 invoice, expect $3,000–$6,000 in fees — pricey, but cheaper than missing payroll.
Factoring vs. a business loan?
Factoring is faster and doesn't add debt — you're selling an asset. Loans are cheaper but slower and require credit approval. Desperate timing favors factoring.
Will my client know I factored their invoice?
Usually yes — the factor typically collects directly. Some clients dislike it; check your contract doesn't prohibit assignment of receivables.