Invoice Factoring vs AR Financing: How Each Actually Works
Factoring is older than the SBA and built for one purpose: converting 30–90 day receivables into same-day cash. For B2B operators with creditworthy customers, it is often the cheapest non-bank capital available.
Factoring (sale of receivable)
You sell the invoice to the factor. They advance 80–90% upfront, collect from your customer, then release the 10–20% reserve minus a 1–4% fee per 30 days outstanding.
AR financing (loan secured by receivable)
You retain the receivable and borrow against it. Cheaper rate but you still chase the collection. Better for operators who do not want their customers contacted.
Recourse vs non-recourse
Recourse = you eat the loss if the customer defaults. Non-recourse = factor eats it, but charges 1–2% more and underwrites every customer.
When it wins on cost
Anything under 60 days outstanding, factored at 2% per 30 days, is an effective ~24% APR — half the cost of an MCA and a quarter of the cost of stacking.
See real offers for invoice financing in 60 seconds.
We'll route your profile to lenders that actually fund this structure. No credit pull. No obligation.