Line of credit vs factoring
Both cover the weeks between doing the work and getting paid. A line of credit is priced on what you draw and gated on your own file. Factoring is priced on your invoices and leans on your customers’ credit.
✓ Checking what you qualify for does not affect your credit score.
Updated October 13, 2026 · Merchant Fund Express
If your business clears the bar for a line of credit, it is usually the cheaper way to bridge slow-paying customers: you draw what you need, pay for the days you use it and draw again. Invoice factoring fits when the business is too young or its credit is too thin for a line, or when sales are growing faster than any line limit, because factoring grows with your invoices. Our published price for a line of credit starts at 1% per month.
| Line of credit | Invoice factoring | |
|---|---|---|
| What you get | A limit you draw from and repay, then draw again | An advance on specific invoices, often 80% to 90% |
| Priced on | The balance you have drawn, for the days it is out | The invoice face value, for the days until the customer pays |
| Who repays | You do | Your customer pays the factor |
| Main approval inputs | Your time in business, credit, revenue and bank activity | Your customers’ payment record, plus your own file |
| Grows with sales | Only when the limit is raised | Yes, every new invoice can be factored |
| Customer involvement | None | Usually notified to pay the factor |
A staffing agency bills its clients $150,000 a month on net 30 terms that in practice run about 45 days, and pays its workers every Friday. A new client starts in November, and the agency needs $80,000 on Friday, November 6, 2026 to carry payroll until the first $100,000 of invoices are paid on Monday, December 21, 2026 (45 days).
| Line of credit | Invoice factoring | |
|---|---|---|
| Cash on Nov 6 | Draw $80,000 from a $100,000 limit | $80,000 advance (80% of $100,000 of invoices) |
| Assumed price | 1% per month on the drawn balance, the published starting price | 2% of face for 30 days, then 1% per 15 days |
| Cost for 45 days | $1,200 ($80,000 x 1% x 1.5) | $3,000 (3% of $100,000) |
| Same, if the line were priced at 2% per month | $2,400 | $3,000 |
| On Dec 21 | You repay $81,200 when clients pay you | Client pays $100,000 to the factor; $17,000 reserve released to you |
| Next month | Draw again from the same limit | Factor the next batch of invoices |
On these assumptions the line costs $1,800 less for the same 45 days, and still costs $600 less at double the starting price. Factoring wins on access, not price: if the agency added three new clients at once, its invoices would grow and so would the cash factoring can advance, while the line would stop at $100,000.
All figures in worked examples are illustrations of the arithmetic, not offers or quotes. Real terms depend on your file and the funder.
Our published Tier 1 for a line of credit asks for 3+ years in business, a 650+ FICO, $300,000 a year or $25,000 a month in revenue, 8+ deposits a month, an average balance of $5,000 or 10% of monthly revenue, at most 3 negative days in a month and at least 50% ownership. A line of credit can sit in second position. A 4-year agency with a 670 score and $150,000 a month clears it.
An established business that clears Tier 1 and has a recurring, predictable gap.
A younger agency, a score below 650, or fast growth with clients who pay reliably.
A file with 6+ months, 600+ FICO and $60,000 in verifiable revenue that does not fit either, for example because its clients pay slowly or inconsistently.
If clients routinely pay at 75 days on 30-day terms, tighten collections or terms before adding any financing, or each month’s cost grows.
No tax returns are needed for a typical first review. For a staffing file, payroll is the largest outflow on the statements, so expect questions about how it lines up with client deposits.
Read business line of credit, invoice factoring and lines of credit for staffing agencies. Then check the free qualification check or start the application. You get a decision the same day on a complete file and see every cost before you sign.
No. Factoring is a sale of your invoices to a factor at a discount. A line of credit is a loan you repay.
For a file that qualifies for both, a line of credit usually costs less for the same days of use, as the example shows.
Sometimes, but the factor usually needs first claim on the invoices it buys, which can conflict with a lien held by the line. Disclose both to each funder.
Our published price starts at 1% per month for files that clear Tier 1. Your price is set by your file and shown before you sign.
Same-day decision. Applying takes a few minutes and will not affect your credit score.
