Sell Your Unpaid Invoices
Invoice factoring is the sale of your unpaid invoices to a factor in exchange for immediate cash. The factor advances up to 90% of the invoice value upfront, takes ownership of the receivable, and collects payment directly from your customer. When the customer pays, you receive the remaining reserve balance minus the factoring fee.
Because it is structured as a sale rather than a loan, factoring typically adds no loan to your balance sheet, though recourse arrangements can be recorded as borrowings, so ask your accountant how yours will be treated. Qualification hinges on your customers' creditworthiness rather than your own. Small-business factoring is often recourse (you buy back invoices a customer never pays); nonrecourse shifts that risk to the factor for a higher fee.
What to expect during setup: the factor verifies each invoice — usually a short verification call to your customer's accounts-payable contact — files a UCC-1 to secure its interest, and, in most arrangements, sends your customer a notice of assignment. If one customer makes up a large share of your invoices, a concentration limit may cap how much is advanced against that debtor. You can factor a single invoice when you need it (spot factoring) or commit your whole ledger for better rates (whole-ledger factoring).
Industries that commonly use invoice factoring:
With invoice factoring, you get up to 90% of your outstanding invoice value upfront instead of waiting weeks or months for customers to pay. The reserve balance is released, minus the fee, once your customer settles the invoice. The exact advance rate varies by industry and by your customers' credit — trucking often reaches the high end, while construction runs lower because of retainage. Figures reflect US B2B invoices as of 2026.
Initial account setup typically takes about 3 to 5 business days while your customers' credit is verified. After that, advances on submitted invoices are often funded same-day, and usually by the next business day.
Factoring qualification hinges on the creditworthiness of the customers who owe you (the debtors), not solely on your personal credit score. That makes it accessible to young or thin-credit businesses that invoice strong, reliable commercial customers.
Factoring is quoted as a flat fee — typically 1% to 5% of the invoice's face value per 30 days — not as an APR. Your rate depends on volume, your customers' credit, payment terms, and industry, and is quoted after a review of your receivables.
Skip the multi-week bank application. Invoice factoring setup centers on your outstanding invoices and basic business information, so you spend less time assembling financials and projections.
Because advances are tied to the invoices you issue, available funding grows as your sales grow — without renegotiating a fixed loan every time you take on a larger contract.
Say you bill a customer $50,000 on Net-60 terms and factor it at an 85% advance and a factor rate of 3% per 30 days.
| Step | Amount |
|---|---|
| Invoice you sell (Net-60) | $50,000 |
| Advance paid to you upfront (85%) | $42,500 |
| Reserve held until your customer pays (15%) | $7,500 |
| Factoring fee (3% per 30 days, for 60 days) | $3,000 |
| Reserve released to you (reserve minus fee) | $4,500 |
| Total you receive | $47,000 |
You have $42,500 in hand two months early, and the cost is $3,000, or 6% of the invoice. Had the customer paid in 30 days, the fee would have been $1,500.
These figures are an illustration within typical US ranges: advances of 80% to 90% and rates of 1% to 5% per 30 days. Some factors charge part or all of the fee on the amount advanced rather than the invoice's face value, so ask how yours is calculated. Your own advance and rate are quoted after a review of your receivables.
A key choice in a factoring agreement is whether it is recourse or nonrecourse, because it determines who absorbs the loss if your customer never pays.
Recourse factoring. You agree to buy back any invoice your customer fails to pay. It is a common structure for small businesses because it carries lower fees — the factor takes on less risk. It works well when you invoice reliable, creditworthy customers.
Nonrecourse factoring. The factor absorbs the loss on defined credit-loss events, such as your customer's insolvency, and you are not required to repurchase the invoice. Nonrecourse costs more because the factor prices in default risk; how much more depends on your customers' credit and which credit events the agreement covers. It suits businesses working with newer customers or in sectors with higher payment uncertainty.
REIL Capital's funding network offers both. Your advisor will help you weigh which structure fits your customer base, industry, and risk tolerance.
Invoice factoring and traditional business loans both provide capital, but they work differently.
| Invoice factoring | Traditional business loan | |
|---|---|---|
| Type of transaction | Sells an asset you already own (the invoice) | Creates new debt |
| Underwriting basis | Your customers' creditworthiness | Your own credit and financials |
| How cost is quoted | Flat factor rate (~1%–5% of the invoice per 30 days), not an APR | Annual interest rate plus fees |
| Funding speed | A short setup of about 3 to 5 business days, then advances that are often same-day and usually arrive by the next business day | Weeks to months |
| Amount | Up to ~90% of invoice value | A fixed lump sum |
| Balance sheet | True-sale factoring adds no new debt | Adds a liability |
| Collateral | The invoices themselves | Often a personal guarantee, business assets, or real estate |
| Best for | Cash-flow gaps from slow-paying customers | Long-term capital investments |
For many small and mid-size businesses, factoring is the faster, more accessible option because it draws on revenue you have already earned. The trade-off is cost: priced as a flat fee per 30 days, factoring typically costs more in effective annual terms than a bank loan you would qualify for, so it is best matched to a real cash-flow-timing need. REIL Capital also offers a business line of credit and MCA debt consolidation.
The two are often confused, but they are different products. Invoice factoring is a sale: the factor owns the invoice, your customer is usually notified, and the factor collects directly and handles credit control. Invoice financing (also called invoice discounting) is borrowing: you take a loan or line of credit against your receivables, keep ownership, and still collect from your own customers, and the arrangement is typically confidential.
Choose factoring if you want the factor to handle collections; choose financing or discounting if you would rather keep the arrangement confidential and collect yourself. REIL Capital's network offers both.
Accounts receivable factoring is another name for invoice factoring — financing built on the money your customers already owe you. Instead of waiting out Net-30 to Net-90 terms, you convert those receivables into working capital now, with up to 90% of their value advanced upfront.
One benchmark of large North American public companies puts fiscal-2025 median Days Sales Outstanding — the average time to collect on a sale — at about 90 days in engineering and construction, the slowest of the industries it tracks. AR factoring closes that collection gap, so payroll and materials do not have to wait on slow-paying customers.
Invoice factoring rates are quoted as a flat factor rate — typically 1% to 5% of the invoice's face value per 30 days — not as an APR. The Federal Reserve notes that factoring financing offers "typically do not express the cost of financing to the potential borrower in the form of an interest rate or APR." The exact rate depends on your monthly volume, your customers' credit, payment terms, and industry. Ranges reflect US B2B invoice factoring as of 2026; your rate is quoted after a review of your receivables.
Before you sign, ask what the total fee comes to in dollars on a typical invoice and how it changes if your customer pays late. Our guide to invoice factoring rates covers fee structures in more detail.
Invoice factoring trades cost and some control for speed. The main disadvantages:
Factoring fits when creditworthy customers pay slowly and the cash lets you take work you would otherwise turn down. It fits poorly when margins are thin, when customers already pay within a few weeks, or when cheaper credit is available to you.
Small business invoice factoring works well for growing companies that invoice larger, credit-strong customers but cannot wait 30 to 90 days to get paid. Because approval hinges on your customers' creditworthiness rather than your own, factoring is often a first line of working capital for businesses that could not clear a conventional bank underwrite.
See our dedicated guide to invoice factoring for small business, or use our free funding calculator for an estimate.
Invoice factoring typically costs 1% to 5% of the invoice's face value per 30 days. Your rate moves with monthly volume, your customers' credit, payment terms, and industry. Some factors use tiered fees that rise the longer your customer takes to pay. See our guide to invoice factoring rates for fee structures.
No. Invoice factoring is the sale of an invoice you already own, so a true-sale arrangement typically adds no loan to your balance sheet. The cost is a flat fee, not an interest rate or APR. Under a recourse agreement, though, you must buy back any invoice your customer never pays, and the arrangement may be recorded as a borrowing.
You can often be paid same-day, and usually by the next business day, on submitted invoices after a short setup that typically takes about 3 to 5 business days. Setup is when your customers' credit is verified, so complete paperwork and creditworthy customers help it move faster. Your first advance follows setup; later ones skip it.
Most B2B factoring advances 80% to 90% of the invoice's face value, and the rest is held as a reserve until your customer pays. The rate varies by industry and by your customers' credit: trucking sits toward the top of the range, and construction runs lower because retainage is held back and not advanced.
Your credit score matters less than your customers' credit. Factoring qualifies primarily on how reliably the businesses that owe you pay, because the factor is advancing against their obligation. REIL Capital's general program minimums include a 500+ credit score, but they are not factoring-specific floors, so ask about your situation if your score is lower.
There is no single best invoice factoring company, because the best fit depends on your industry, invoice volume, and customers. Compare the advance rate, the factor rate and what it is charged on, recourse or nonrecourse terms, contract length, and whether the factor specializes in your industry. Our guide to best invoice factoring companies covers how to choose.
