Supply Chain Finance

Invoice Factoring

Get paid on your invoices now, not in 30, 60 or 90 days

What is invoice factoring?

Invoice factoring lets you sell your outstanding B2B invoices to a factoring company in exchange for immediate cash — typically 80–95% of the invoice value within 24–48 hours. Instead of waiting 30, 60, or 90 days for your customers to pay, you get cash now. When your customer pays the invoice, the factor remits the remaining balance minus their fee (typically 1–5% of invoice value per 30 days). The fee applies for each 30-day period the invoice remains outstanding — so slower-paying customers cost more. Because you're selling an asset rather than borrowing, factoring doesn't add debt to your balance sheet — making it one of the fastest ways to convert receivables into working capital.

How it works

1

You deliver goods or services to your B2B customer and issue an invoice with net-30, 60, or 90 terms

2

You submit the invoice to a factoring company, who verifies the invoice and your customer's creditworthiness

3

The factor advances 80–95% of the invoice value to your account, typically within 24–48 hours

4

Your customer pays the invoice on their normal terms. The factor collects payment directly from your customer and remits the remaining balance to you, minus their factoring fee. If your customer pays late, additional fees may accrue for each 30-day period beyond the original terms.

Best for

B2B businesses with long payment terms (net-30 to net-90) from creditworthy customers

CPG brands selling to retailers who pay on 60–90 day terms

Staffing and service companies with payroll needs that can't wait for customer payments

Trucking and freight companies waiting on shipper payments while covering fuel, maintenance, and driver pay

Construction subcontractors billing general contractors on 60–90 day progress payment terms

Fast-growing companies that need cash flow but don't qualify for traditional bank loans yet

Requirements

Primary requirementOutstanding B2B invoices from creditworthy customers with verifiable delivery of goods or services
Time in business6+ months (some factors work with startups that have strong receivables)
Annual revenue$250,000+ (most factors require minimum monthly volumes of $10K–$25K)
Credit scoreNot the primary factor — your customers' creditworthiness determines approval and advance rates. Some factors check personal credit but there is no hard minimum
Key documentsIncome/Profit & Loss statement (monthly), balance sheet (monthly), cash flow statement (monthly), accounts receivable aging report, articles of incorporation, bank statements (6+ mo), government-issued ID, cap table, invoices
Customer notificationMost factoring is "notification" — the factor informs your customer that payment should be sent to them. Non-notification (confidential) factoring is available at higher cost
Minimum invoice sizeTypically $500–$1,000 per invoice (varies by factor)

Frequently asked questions

With invoice factoring, you sell the invoice to the factor — they take ownership and collect payment directly from your customer. With invoice financing (also called accounts receivable financing), you borrow against the invoice but retain ownership and handle collections yourself. Factoring is simpler but means your customer knows a third party is involved. Invoice financing is typically available to more established businesses with stronger credit profiles, while factoring is more accessible because the factor is underwriting your customers' credit, not yours.
Invoice factoring typically costs 1–5% of the invoice value per 30-day period. If your customer pays within 30 days, you pay one period of the fee. If they pay in 60 days, you pay two periods. On a $200K invoice with 60-day payment terms at the high end of the fee range, the factoring fee would be $20,000. The total cost depends on your customers' payment speed, invoice volume, and your history with the factoring company. Higher-volume clients and those with fast-paying customers get significantly better rates.
In most factoring arrangements (called "notification factoring"), yes — the factor sends a notice of assignment to your customer instructing them to pay the factor directly. This is standard practice and most B2B customers are familiar with it, particularly in industries like trucking, staffing, and construction where factoring is widespread. If customer perception is a concern, some factors offer non-notification (confidential) factoring where your customer is unaware, but this comes with higher fees and stricter qualification requirements.
This depends on whether your factoring agreement is recourse or non-recourse. With recourse factoring (most common, lower fees), if your customer doesn't pay within a specified period (typically 60–90 days past due), you must buy back the invoice or replace it with another qualifying invoice. With non-recourse factoring (higher fees), the factor absorbs the loss if your customer can't pay due to insolvency — but non-recourse typically only covers customer bankruptcy, not payment disputes or dissatisfaction. Always clarify the recourse terms before signing. Most factors will notify you well before the buyback deadline, giving you time to follow up with your customer or arrange a replacement invoice.
Most factors can fund within 24–48 hours of approving an invoice. The initial setup and due diligence takes 3–7 days. Once your account is established, submitting new invoices for factoring is usually same-day or next-day.
Many factors require a minimum monthly volume, often $10,000–$50,000 in invoices per month. Some also require long-term contracts (6–12 months). However, spot factoring services exist that let you factor individual invoices without a commitment.

Invoice Factoring Cost Calculator

See the real cost of invoice factoring and what Laminar can save you.

Cost Breakdown

Total factoring fee$15,000
Broker fee$7,500
Document gathering$200
Application submissions$150
Lender back-and-forth$150
Wrong lender risk (0.5%)$2,500
Advanced amount$200,000
Holdback returned$35,000
Total cost of borrowing$25,500
Laminar saves you
$9,050

35.5% of total cost. No broker fees, no app-by-app submissions, no back-and-forth, and lower factoring fees via Laminar lender matching.

Owner time valued at $50/hr. Actual costs vary.