Explained
Factoring sells your unpaid invoices at a discount so you get paid now instead of in 60 days. Useful when your customers are slow, wrong when your problem is something else.
✓ Checking what you qualify for does not affect your credit score.
You deliver the work and issue the invoice. A factor advances you most of its value now, collects from your customer on the normal terms, then remits the balance less their fee.
The critical point is that factoring is underwritten on your customer's creditworthiness, not yours. That makes it available to businesses with thin credit files, as long as they invoice solid commercial customers.
| Recourse | Non-recourse | |
|---|---|---|
| If the customer never pays | You buy the invoice back | The factor absorbs it, within defined limits |
| Cost | Lower | Higher |
| Typical use | Established customer relationships | Concentration in one or two large customers |
Non-recourse is not blanket protection. It usually covers customer insolvency, not a dispute over whether the work was done properly. Read what is actually excluded.
Factoring is priced as a discount on the invoice, often with the fee stepping up the longer the invoice stays unpaid. Compare offers on total dollars given up per invoice, not on the headline percentage, and model what happens if your customer pays at 75 days instead of 30.
No. You are selling an asset — the invoice — at a discount rather than borrowing against it.
Less than usual. The factor is relying on your customer to pay, so their creditworthiness carries most of the weight.
In most arrangements yes, because they are told to pay the factor directly.
Factoring cannot help there. Deposit-based working capital or purchase order financing covers the pre-delivery gap.
Same-day decision. Applying takes a few minutes and will not affect your credit score.
