Invoice Factoring: Turn Unpaid Invoices Into Immediate Cash
Invoice factoring lets you sell your accounts receivable for immediate cash—typically 80-90% of the invoice value—without waiting 30, 60, or 90 days for customers to pay.
Sarah Johnson, MBA
Small Business Finance Expert
Updated February 2, 2026 • 8 min read
How Invoice Factoring Works
1
Submit Invoice
Send unpaid invoices to factor
2
Get 80-90%
Receive advance within 24-48 hrs
3
Factor Collects
They collect from your customer
4
Get Remainder
Minus 1-5% factoring fee
Invoice Factoring Requirements
B2B or B2G Invoices
Must invoice other businesses or government agencies (not consumers)
Creditworthy Customers
Approval based on YOUR customer's credit, not yours
Clean Invoices
No liens, disputes, or other claims on the receivables
Factoring Costs Explained
| Cost Type | Typical Range | Details |
|---|---|---|
| Factoring Fee | 1-5% | Per invoice, based on customer credit |
| Advance Rate | 80-90% | Upfront payment percentage |
| Reserve | 10-20% | Held until customer pays |
Example: $10,000 invoice → $8,500 advance (85%) → Customer pays → You get $1,200 (minus 3% fee = $300)
Best Industries for Invoice Factoring
Trucking & Transportation
Manufacturing
Staffing Agencies
Construction
Wholesale & Distribution
IT Services
Healthcare
Government Contractors
Oil & Gas