1 What Is Invoice Factoring?
Invoice factoring is a financial transaction where a business sells its outstanding invoices to a third-party company (called a factor) in exchange for an immediate cash advance — typically 80–95% of the invoice value. The factor then collects payment directly from your customer when the invoice comes due, and releases the remaining balance (minus fees) back to you.
Invoice factoring is not a loan. You're selling a business asset — your receivables — not borrowing money. That means no debt on your balance sheet, no monthly repayments, and no interest charges.
It's one of the oldest forms of business finance, used by companies of every size — from small staffing agencies waiting 60 days for a corporate client to pay, to large construction firms managing multi-million-dollar project invoices. The core value proposition is simple: you get paid today instead of waiting 30, 60, or 90 days.
2 How Does Invoice Factoring Work?
The process is straightforward and typically takes less than 24 hours once you're set up. Here's the 5-step process:
You deliver your product or service
You complete the work and issue an invoice to your business customer with net-30, net-60, or net-90 payment terms as usual.
You submit the invoice to CashBridge
Instead of waiting for your customer to pay, you submit the invoice through your factoring account. This can be done the same day you issue it.
CashBridge advances 80–95% immediately
We verify the invoice and advance the agreed percentage — typically within 24 hours, often same day. The funds hit your account directly via ACH or wire.
Your customer pays CashBridge on the due date
When the invoice comes due, your customer pays CashBridge directly (or you collect and remit, depending on your structure). This is the only change your customer sees.
CashBridge releases the remaining balance minus fees
Once your customer pays, CashBridge releases the remaining reserve balance — the original invoice amount, minus the advance and the factoring fee.
Example: You have a $50,000 invoice due in 45 days. CashBridge advances $42,500 (85%) today. Your customer pays $50,000 on day 45. CashBridge releases $6,500 back to you, minus a 1.5% fee ($750). Your net: $49,250 — received 45 days early.
3 Advance Rates: How Much Can You Get?
The advance rate is the percentage of the invoice face value you receive upfront. At CashBridge, advance rates range from 80% to 95%, determined by:
The primary factor in your advance rate is the creditworthiness of your customer (the invoice payer), not your own credit history. If you work with Fortune 500 companies or large government entities, you'll typically see the highest advance rates available. Use our advance rate calculator to get an instant estimate based on your specific invoices.
4 Costs and Fees Explained
Factoring fees are typically expressed as a percentage of the invoice face value. Here's what affects your rate:
| Fee Driver | Typical Range | Notes |
|---|---|---|
| Base factoring fee | 1% – 3% | Per invoice, for net-30 terms |
| Extended payment terms | +0.5% per 30 days | Net-60 and net-90 add incremental fees |
| High-volume discount | –0.25% to –0.5% | $100K+/month in factored volume |
| Setup fee | $0 at CashBridge | Some factors charge $500–$2,000 |
| Minimum volume fee | Varies | CashBridge has no minimums |
The all-in cost to factor a $50,000 net-30 invoice at a 1.5% rate is $750 — and you get $42,500–$47,500 in your account today instead of waiting 30 days. For most businesses, the cost of factoring is less than the cost of a cash flow gap: missed payroll, lost vendor discounts, or declined growth opportunities.
Pro tip: Compare factoring cost to the opportunity cost of waiting. If you can take on 20% more clients with the extra working capital, the math usually favors factoring even at 3% rates.
5 Pros and Cons of Invoice Factoring
Invoice factoring is the right tool for some businesses and the wrong one for others. Here's a straight look at both sides:
✓ Pros
- Cash in 24 hours, not 30–90 days
- No debt added to your balance sheet
- Approval based on customer credit, not yours
- Scales with your revenue — no fixed limits
- No collateral required (invoices are the collateral)
- Outsource collections and credit management
- Accessible to startups with short credit history
× Cons
- Higher cost than a bank line of credit (if you qualify)
- Works only for B2B invoices — not B2C
- Your customer must pay the factor directly
- Overdue or disputed invoices can delay reserves
- Not suitable for project-based or retainer billing
- May reduce margin on low-margin industries
Invoice factoring is most valuable when: (1) you have long payment terms, (2) you're growing faster than your cash flow allows, or (3) you don't qualify for traditional bank financing. It's less cost-effective if you already have access to a cheap revolving credit line and your cash flow is comfortable.
6 Who Qualifies for Invoice Factoring?
The eligibility criteria are much broader than a bank loan. Here's what you need:
B2B invoices with creditworthy customers
Your invoices must be for products or services already delivered to business customers — not consumers. The creditworthiness of your customers matters most.
Net-30 to net-90 payment terms
Invoice factoring works with standard trade credit terms. Invoices due within 90 days are eligible. Same-day payment invoices don't qualify — there's nothing to factor.
Minimum $10,000 in outstanding invoices
CashBridge works with businesses factoring from $10,000 to $10 million+ per month. There's no upper limit.
No tax liens or legal encumbrances on receivables
Your invoices must be free of liens. Active tax liens or UCC filings that encumber receivables need to be cleared first.
Common qualifying industries include staffing, construction, healthcare, trucking, manufacturing, wholesale distribution, and B2B professional services. If you're unsure, run your numbers through our calculator in 60 seconds.
7 Invoice Factoring vs. Bank Loans
Both solve cash flow problems but through very different mechanisms. Here's a direct comparison:
| Criteria | Bank Line of Credit | Invoice Factoring |
|---|---|---|
| Approval based on | Your credit history, revenue, collateral | Your customers' creditworthiness |
| Time to fund | Weeks to months | 24 hours or less |
| Adds debt? | Yes — appears on balance sheet | No — it's a sale, not a loan |
| Personal guarantee? | Usually required | Typically not required |
| Cost | Prime + 1–4% annually | 1–5% per invoice |
| Limit scales with | Fixed credit limit | Your invoice volume |
| Best for | Established businesses with strong credit | B2B businesses with slow-paying clients |
If you qualify for a bank line of credit at competitive rates, that's usually cheaper. But if you've been declined, need capital faster than a bank can move, or want funding that grows automatically with your sales volume — invoice factoring is often the better fit. See our full pricing page for current CashBridge rates and apply in 5 minutes.
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- What documents you'll need
- How to choose the right advance rate
- Red flags to avoid in a factoring contract
8 Frequently Asked Questions
Invoice factoring is when a business sells its unpaid invoices to a factoring company at a small discount in exchange for immediate cash — typically 80–95% of the invoice value. The factoring company collects payment from your customer when the invoice comes due, then releases the remaining balance minus fees. It is not a loan — there is no debt on your balance sheet and no monthly payments.
Factoring fees typically range from 1% to 5% of the invoice face value, charged per invoice. The rate depends on invoice volume, payment terms (net-30 vs. net-90), and your customers' creditworthiness. CashBridge discloses your exact rate before you commit — no hidden fees, no setup charges.
In most setups, yes — your customer will be notified to remit payment to CashBridge instead of directly to you. This is called "disclosed" or "notification" factoring, and it's the standard structure. Many businesses find customers don't mind at all — they simply update payment instructions. Confidential factoring (where the customer is unaware) is available for certain accounts but typically comes at higher rates.
No — your personal or business credit score is not the primary approval factor. Invoice factoring approval is based on the creditworthiness of your customers (the invoice payers). This makes factoring accessible to new businesses, businesses with past credit issues, or businesses that have been declined by banks. CashBridge does a soft credit review on your customers, not a hard pull on you.
Most clients receive their first advance within 24 hours of submitting approved invoices. Same-day funding is available for invoices under $500K with creditworthy customers. After your account is set up, repeat funding is typically same-day or next-morning via ACH. Wire transfers settle the same business day for urgent needs.