Invoice Factoring for Small Businesses — Turn Unpaid Invoices Into Working Capital.
Stop waiting 30, 60, or 90 days for invoices to pay. We match you across a network of factoring companies to convert your accounts receivable into cash — typically within 24 to 48 hours after setup.
What is invoice factoring?
Invoice factoring is the sale of your unpaid invoices to a factoring company at a discount in exchange for immediate cash. Instead of waiting for your customers to pay on net-30, net-60, or net-90 terms, you get the majority of the invoice value up front — typically 80% to 95% — and the factor collects from your customer directly.
A related product is accounts receivable financing (also called invoice financing), which uses your invoices as collateral for a loan rather than selling them outright. With AR financing, you retain ownership of the invoices and collect payment yourself. Both products convert receivables into working capital — the right choice depends on your volume, your customer relationships, and how much control you want over collections.
Berkman Financial is a broker, not a factor. Your advisor takes your situation to a network of factoring companies and brings back the best available options — so you compare offers instead of settling for the first one.
How invoice factoring works.
Submit your invoices.
Provide your accounts receivable aging report, sample invoices, and a customer list. Your Berkman advisor uses this to identify the best factoring options.
We match a funder.
Your file goes to our network of factoring companies. You see offers side by side — advance rate, factor fee, and terms — so you can choose the best fit.
You get your advance.
Once you accept an offer, the factor advances 80–95% of the invoice value directly to your bank account. Most initial setups fund within 3–7 business days; ongoing invoices fund in 24–48 hours.
Customer pays the factor.
When your customer pays the invoice, the factor remits the remaining reserve to you minus the factor fee. The cycle repeats with each new invoice you submit.
Want the full breakdown? See how our funding process works.
Who qualifies for invoice factoring?
Invoice factoring qualification is based primarily on the creditworthiness of your customers — not your own credit profile. If your customers are established businesses or government agencies that pay their invoices, you are likely eligible.
Minimum requirements
- B2B or B2G invoices with creditworthy customers
- $5,000+ in monthly invoices
- 3+ months in business
- Active U.S. business bank account
- No open bankruptcies
Your personal or business credit score is typically not the deciding factor. Factors care most about whether your customers pay their bills on time.
Benefits of invoice factoring.
Immediate cash from outstanding invoices.
Instead of waiting 30, 60, or 90 days for customers to pay, get 80–95% of the invoice value within hours. Close the gap between delivering work and getting paid for it.
No debt added to your balance sheet.
Invoice factoring is a sale of an asset, not a loan. It does not increase your liabilities or affect your debt-to-equity ratio. This preserves your borrowing capacity for other needs.
Approval based on customer credit, not yours.
Factoring companies underwrite based on your customers' ability to pay, not your personal or business credit score. This makes factoring accessible even if your own credit profile is limited or imperfect.
Scales with your revenue.
The more you invoice, the more you can factor. Unlike a fixed loan amount, factoring grows with your business. Take on bigger contracts knowing the cash flow will be there to support them.
Outsourced collections.
In most factoring arrangements, the factor handles collections from your customers. This saves you time, reduces administrative overhead, and can improve your days-sales-outstanding metrics.
Factor when you need to.
Most factoring arrangements are flexible — you choose which invoices to factor and when. You are not locked into factoring every invoice, so you can use it strategically for specific cash flow needs.
Invoice factoring vs. invoice financing vs. a bank loan.
| Invoice Factoring | Invoice Financing (AR Loan) | Bank Line of Credit | |
|---|---|---|---|
| Structure | Sale of invoices | Loan secured by invoices | Revolving credit facility |
| Advance rate | 80–95% of invoice value | 80–90% of invoice value | Varies by lender |
| Cost | 1–5% per 30 days | 1–3% per month + interest | Interest only (lower rate) |
| Speed | 24–48 hrs (after setup) | 1–2 weeks | 2–6 weeks |
| Credit basis | Your customers' credit | Your credit + invoices | Your credit + financials |
| Debt on balance sheet | No | Yes | Yes |
| Collections | Factor collects | You collect | You collect |
Invoice factoring is typically the fastest option and the most accessible for businesses with strong customers but limited credit history. The trade-off is cost — factoring fees are higher than bank interest rates, but you gain speed and flexibility.
Industries that use invoice factoring.
Any B2B business with outstanding invoices can benefit from factoring, but these industries use it most often due to long payment cycles and high working capital demands.
Don't see your industry? Browse all industries we fund.
How much does invoice factoring cost?
Invoice factoring is priced using a factor fee (also called a discount rate) — a percentage of the invoice face value charged for each period the invoice is outstanding. The fee is not interest; it is a flat charge per billing cycle.
Typical factor fees range from 1% to 5% per 30 days, depending on your monthly volume, the creditworthiness of your customers, and your industry. Higher-volume accounts and customers with strong payment histories generally receive lower rates.
Every offer from Berkman Financial shows the advance rate, the factor fee, the reserve holdback, and any additional fees. You see the complete cost before you commit.
How to apply for invoice factoring.
Getting started with invoice factoring at Berkman Financial takes about five minutes. There is no hard credit pull and no commitment until you accept an offer.
What you need
- Accounts receivable aging report
- Sample invoices
- Customer list with contact info
- 3 months of business bank statements
What you don't need
- Perfect credit score
- Collateral or personal guarantee
- Years of financial statements
- Minimum revenue threshold (in most cases)
What happens next
- Advisor reviews your AR portfolio
- Matched to factoring companies in our network
- Choose the best offer side by side
- First funding within days
What businesses use invoice factoring for.
Bridging slow-paying customers.
Your biggest customers often have the longest payment terms. Invoice factoring closes the gap between delivering work and getting paid — so a net-60 invoice does not create a 60-day cash flow hole.
Covering payroll between invoices.
Payroll does not wait for your customers to pay. Factoring gives you the cash to meet payroll on time, every time, without dipping into reserves or taking on debt.
Taking on larger contracts.
A big contract means big upfront costs — materials, labor, equipment. Factoring the invoices from that contract funds the work as you do it, so you do not turn down revenue because of cash flow timing.
Seasonal cash flow gaps.
Many B2B businesses have predictable busy and slow seasons. Factoring during the busy season — when invoices are high but payment lags — keeps cash flowing through the dip.
Funding growth without debt.
Because factoring is not a loan, it does not add leverage to your balance sheet. You can fund growth, hire staff, and invest in your business without increasing your debt load or diluting equity.
Avoiding early-payment discounts to suppliers.
Some suppliers offer 2/10 net-30 discounts — pay in 10 days and save 2%. Factoring your receivables gives you the cash to capture these discounts, which can more than offset the factoring fee.
Risks and considerations.
Invoice factoring is a powerful cash flow tool, but it is not without trade-offs. Understanding them helps you decide whether factoring is the right fit.
Customer notification
In most factoring arrangements, your customer is notified that the invoice has been assigned to a factor and is instructed to pay the factor directly. Some business owners prefer to keep the relationship private — if that matters to you, ask about non-notification factoring options.
Cost on short-cycle invoices
If your customers pay quickly (within 15–20 days), the effective annualized cost of factoring can be high relative to the cash flow benefit. Factoring tends to deliver the most value on invoices with 30+ day terms.
Recourse vs. non-recourse risk
With recourse factoring, you are responsible if your customer does not pay. This is the more common (and cheaper) arrangement. Non-recourse factoring shifts that risk to the factor but costs more. Understand which type you are signing up for.
Customer creditworthiness matters
Factoring approval depends on your customers' ability to pay. If your customer base includes businesses with poor credit or a history of slow payment, factoring may not be available — or rates will be higher to compensate for the risk.
Invoice factoring questions.
What is the difference between invoice factoring and invoice financing?+
Invoice factoring involves selling your invoices to a factor who advances you cash and collects payment directly from your customer. Invoice financing (also called accounts receivable financing) uses your invoices as collateral for a loan — you retain ownership of the invoices and collect payment yourself. Factoring is simpler and faster; financing gives you more control over the customer relationship.
How much does invoice factoring cost?+
Factor fees typically range from 1% to 5% of the invoice value per 30 days. The exact rate depends on your monthly invoice volume, your customers' creditworthiness, and your industry. Higher volume and stronger customers generally mean lower rates. Your Berkman advisor will show you the fee structure on every offer before you commit.
Is invoice factoring a loan?+
No. Invoice factoring is a sale of an asset — your accounts receivable — not a loan. Because it is not debt, it does not appear as a liability on your balance sheet and does not affect your borrowing capacity. This distinction matters for businesses that want to preserve their debt-to-equity ratio.
Can you get invoice factoring with bad credit?+
Yes. Factoring companies underwrite based on your customers' credit, not yours. If your customers are creditworthy businesses or government agencies, your personal or business credit score is typically not a barrier to approval.
How fast do you get paid with factoring?+
Initial setup takes three to seven business days as the factor reviews your accounts receivable and customer base. After setup, most factors advance funds within 24 to 48 hours of receiving a new invoice. At Berkman, we match you with factors that prioritize speed.
What is recourse vs. non-recourse factoring?+
With recourse factoring, you are responsible if your customer does not pay the invoice — the factor can require you to buy it back. With non-recourse factoring, the factor absorbs the loss from customer non-payment. Non-recourse typically costs more but protects you from default risk. Both options are available through our network.
Who qualifies for invoice factoring?+
Any business that invoices other businesses (B2B) or government agencies (B2G) with payment terms of 30 days or more. The key qualification is the creditworthiness of your customers, not your own credit profile. Most factors require a minimum of $5,000 in monthly invoices.
Does my customer know I'm factoring?+
It depends on the arrangement. In notification factoring, your customer is informed and pays the factor directly — this is the most common setup. In non-notification factoring, your customer is not informed and continues paying you as usual. Both options are available, and your advisor will explain the trade-offs of each.
Get invoice factoring today.
Five-minute application. Multiple factoring offers compared side by side. Funding in days. One named advisor from start to finish. Join 10,000+ small businesses that have funded with Berkman Financial since 2015.
Not sure if invoice factoring is right for you? Compare all business funding options.
Want to learn more? 7 common myths about invoice factoring — debunked.