You did the work, sent the invoice, and now you wait — 30, 60, sometimes 90 days — while payroll, fuel and suppliers are due this week. Invoice financing and invoice factoring are the two products built for exactly that gap: both turn a B2B invoice you have already earned into cash in about 24–48 hours instead of waiting out your customer’s payment terms. They are not the same product, they do not cost the same, and the wrong choice is expensive. This page is the map; the linked guides go deep on each route.
General information, not financial advice.
Invoice factoring is a sale. You sell the invoice to a factoring company (the “factor”) at a discount. The factor advances you most of the face value up front — typically 80–90% (QuickBooks, Xero and Invoiced cite this band; NetSuite widens it to 70–90%) — collects payment from your customer itself, then releases the remaining reserve minus its fee. Because the factor is buying your customer’s promise to pay, it underwrites mainly your customer’s creditworthiness, not yours — which is why, as the US Chamber of Commerce’s CO guide puts it, factoring is often easier to qualify for than a loan. Full mechanics: what is invoice factoring?
Invoice financing is borrowing. You take a loan or draw on a line of credit secured by your unpaid invoices. You keep ownership of the receivable, you keep the customer relationship, and you do your own collecting — your customers typically never know the facility exists (NerdWallet; Allianz Trade). Advances run up to about 90% of invoice value (NerdWallet; Stripe cites 80–90%). Because it is secured lending, the lender underwrites your business and your receivables process, not just your customers. Full mechanics: what is invoice financing?
| Factoring | Financing | |
|---|---|---|
| What happens to the invoice | You sell it | You borrow against it |
| Who collects from your customer | The factor | You |
| Who your customer pays | The factor (notice of assignment) | You, as normal |
| Underwriting focus | Your customers’ credit | Your business + your AR process |
| Does it appear as debt? | No — it is a sale | Yes — a loan/line on your balance sheet |
| Typical cost shape | Fee of 1–5% of face value per 30 days (LendingTree; Allianz Trade) | Interest on the amount drawn plus fees; typically cheaper (US Chamber CO) |
That is the short version. The full 8-row comparison — risk, visibility, qualification, balance-sheet treatment — is on the factoring vs financing page, with both products priced on the same invoice.
Whichever product you choose, the cash moves the same way:
There is no regulator-published rate card for factoring; every figure below is an attributed published range, not a quote.
Run your own invoice through the invoice factoring calculator to see the advance, the fee, the reserve release and the true net — before you talk to any provider.
The generic mechanics flex by industry, and three have their own pages:
Skip both if your invoices are to consumers (neither product buys consumer debt), if the work is disputed or unfinished (unverifiable invoices do not fund), or if your margins are thinner than the fee — on a contract running at a 4% margin, a 3%-of-face factoring fee does not bridge a cash gap, it eats the profit. If the underlying problem is that customers pay slowly and you have no collections process, factoring’s bundled collections may still be the fix — but price it honestly first with the calculator and the costs guide.
Receivables products are fast and comparatively expensive. If you can wait for underwriting, an SBA 7(a) loan is usually far cheaper money. A business line of credit or a working-capital term loan can also bridge invoice gaps at lower cost once approved — those general products are covered in our working-capital guides. The receivables products win on speed and on qualifying when your own credit is thin but your customers are strong.
Before you sign anything, read how to choose a factoring company — the headline rate is the least honest number in the quote.
What is invoice financing? An umbrella term for turning unpaid B2B invoices into immediate cash. In its strict sense — and on this site — it means borrowing against your invoices with a loan or line of credit while you keep ownership and collect yourself (NerdWallet; QuickBooks). Selling the invoices outright is factoring, covered above.
How does invoice financing work? You pledge or sell an invoice for completed work; after the provider verifies it and checks your customer’s credit, you receive most of the face value (commonly 70–95%) within about 24–48 hours. When the customer pays, the balance is settled: in financing you repay the draw plus interest and fees; in factoring the factor releases the reserve minus its fee (Stripe; QuickBooks).
Is invoice financing a loan? Invoice financing is — it is debt secured by your receivables, and the advance sits on your balance sheet as a liability. Invoice factoring is not: it is a sale of the receivable, so no loan is created (NerdWallet’s comparison; Xero’s accountant guide). The distinction drives the cost, the accounting and who collects.
What is the difference between invoice financing and factoring? Ownership and collections. Factoring sells the invoice and the factor collects from your customer, openly. Financing borrows against the invoice, you keep it, and you collect — usually invisibly to the customer (NerdWallet; NetSuite). The full comparison prices both on the same $20,000 invoice.
How much does invoice financing cost? Factoring fees typically run 1–5% of face value per 30 days (LendingTree; Allianz Trade); financing charges interest on the drawn amount plus fees and typically totals less, because no collection service is bundled (US Chamber CO). Your industry, your customers’ credit and how fast they actually pay move the real number more than the headline quote — decode any offer with the costs guide and the calculator.
Sources: NerdWallet invoice financing, factoring and comparison guides; US Chamber CO factoring-vs-financing comparison; QuickBooks and Stripe invoice financing guides; Xero factoring and accountant guides; NetSuite; LendingTree factoring roundup; Allianz Trade. Currency verified 2026-10-23.