Funding options
Invoice factoring
Not a loan. A factor buys the invoice, advances most of it today, and sends the rest when your customer pays, less a fee for every period it stayed open. If your money lives in other people’s payment terms, this is the shape built for it.
About two minutes. No credit pull to start. Free to you. Funding partners pay Addy for the introduction. Not an offer or an approval.
- How it is priced
- A fee, usually a percentage of the invoice for each 30 days it stays unpaid, sometimes stepped every 10 or 15 days. Not interest.
- How you repay
- You do not. Your customer pays the factor; the factor sends you the balance less the fee.
- What owners use it for
- Payroll while a fleet account, a general contractor, an insurer or a network sits on your invoice.
Amounts, rates and terms come from the funding partner and depend on what your file shows. I do not set them, and I cannot promise them.
What it is
The plain version.
Factoring is a sale, not a loan. A factor buys an invoice you have issued to a business customer and advances most of its value today. When your customer pays the factor, you get the rest, less the factor’s fee. Your own credit matters less than your customer’s, because the customer is who the factor is waiting on.
The fee is charged for time: a percentage per 30 days, or a schedule that steps up every 10 or 15 days. A customer who pays in 20 days costs you less than one who pays in 60. That makes it expensive for slow payers and reasonable for reliable ones, and it means the question to ask is not the rate but the fee at the number of days your customers actually take.
Two words decide a lot: recourse and notification. Recourse means if your customer never pays, you buy the invoice back. Notification means your customer is told to pay the factor instead of you. Ask about both before anything else.
What the money costs
- Invoice
- $25,000
- Advanced today
- 85%, or $21,250
- Illustrative fee
- 2% per 30 days
- Customer pays in
- 45 days
- Back to you when paid
- $3,000
- Cost of the money
- $750
Illustration only, not a quote. Fee structures vary, and what happens past 90 days varies more; ask about both.
On those numbers, $750 bought 45 days of $21,250: expensive money if you annualise it, cheap money next to a missed payroll. Run it at the days your customers actually take, not the days they promise.
How it works
Four steps, and the one that surprises people is the last.
- 1
You send the invoice
Issued to a business customer, for work already done. Consumer invoices and work in progress generally do not factor.
- 2
The factor advances most of it
Once it has checked the customer, usually within days. The advance rate is the share you get now.
- 3
Your customer pays the factor
On their usual terms. With notification factoring they are told to; without it, you pass the payment on.
- 4
You get the rest, less the fee
The fee depends on how long the invoice stayed open, so a slow customer costs you more than a quick one.
What partners may read
What a funding partner may look at.
- Who your customers are and whether they pay. A factor underwrites them more than it underwrites you
- How old the invoices are, and how long that customer usually takes
- Whether the work is complete, delivered and undisputed
- How much of your book is one customer
- Whether the invoices are already pledged to a lender or a line
- That the customers are businesses, not consumers
My read of what underwriting tends to weigh, not a list anyone published and not a test I score. Every partner sets its own criteria and none has told me what they are. Partners underwrite and decide; my job is to make the request readable so the answer comes back either way.
When it fits
- Business customers on net-30 to net-90 terms who do pay, just slowly
- Work done and invoiced, not in progress
- Payroll or stock that cannot wait for the invoice to clear
- A book spread across several customers rather than one
When it is the wrong tool
- Your customers pay at the door. There is nothing to factor; a line or an advance fits the gap instead
- The work is progress-billed or disputed. Construction draws and retainage are the hardest case
- Your customers are consumers
- A customer who might not pay at all, on a recourse deal. You would be buying the invoice back
Questions
The ones owners actually ask.
Still stuck? The guides go further:
How does invoice factoring work?
You send a factor an invoice you have issued to a business customer for work already done; the factor advances most of its value today, your customer pays the factor on their usual terms, and the factor sends you the rest less a fee for each period the invoice stayed open. It is a sale, not a loan, and there is nothing to repay. The two words to ask about first are recourse and notification. Put an invoice through the calculator.
Is factoring a loan?
No. It is the sale of an invoice at a discount. There is nothing to repay; the factor collects from your customer and settles the difference with you. That is why it is priced by time and not by an interest rate.
What is recourse?
Recourse factoring means the risk stays with you: if your customer never pays, you buy the invoice back. Non-recourse means the factor carries that risk, and charges more for it. Ask which you are being offered, and read what counts as non-payment.
Will my customer know?
Usually yes. Most factoring is notification factoring, where your customer is told to pay the factor. Some factors offer non-notification arrangements; they are less common and cost more. Ask.
What does it cost as an APR?
It has no APR, because it is a sale priced by time. The arithmetic above is the comparison: $750 for 45 days on $21,250, an illustration. Annualise it and it is high; set it against what a missed payroll or a lost job costs, and it can still be the right call.
Will applying pull my credit?
Not with me. The form on this page is information, not an application, and I do not run credit. A factor looks harder at your customers’ credit than at yours, and it will tell you what it checks.
Can I factor construction invoices?
Sometimes, and it is the hardest case. Progress billing, retainage and lien rights make many factors decline them. If that is your book, ask a factor that works in construction, and expect a lower advance rate.
Get funding options
Tell me about the business.
One form covers every shape on the shelf. Tell me about the business and roughly how much you're after; partners who work with businesses like yours take it from there. About two minutes, no credit pull from me.