Funding · Factoring

Invoice Factoring for Small Business

Invoice factoring turns unpaid B2B invoices into same-week cash. You sell the invoice to a factoring company for 80–95% of face value, they collect from your customer, and you get the balance minus a fee. It's built for small businesses whose customers pay net-30, net-60, or net-90 while payroll, materials, and fuel bills won't wait. Because factors underwrite your customers' credit instead of yours, personal FICO barely matters — making factoring one of the easier alternative funding options to qualify for. Below: how it works, what it costs, and construction-specific rules.

How invoice factoring works

1. Submit an invoice. You send the factor a copy of the unpaid B2B invoice.
2. Get an advance. Within 1–5 days the factor wires you 80–95% of face value.
3. Factor collects. Your customer pays the factor directly (Notice of Assignment redirects payment).
4. Reserve released. Once the invoice clears, the factor sends you the remainder minus the fee (typically 1–5% per 30 days outstanding).

Factoring vs. other cash-flow options

Product	How it works	Typical cost	Speed	Best for
Invoice factoring	Sell the invoice; factor collects	1–5% per 30 days	1–5 days	B2B with slow-paying customers
Invoice financing	Borrow against invoices; you collect	0.5–4% per 30 days	1–5 days	Owners who want to keep collections in-house
Business line of credit	Revolving credit you draw as needed	10–60% APR	1–7 days	Ongoing, unpredictable cash-flow gaps
Merchant cash advance	Cash repaid from card sales	1.20–1.50 factor	24–48 hours	Retail/restaurants, no invoices

Construction invoice factoring

Construction is a specialty within factoring. Progress billing, retainage, lien waivers, and pay-when-paid clauses make construction receivables harder to fund than a straightforward net-30 invoice — but factors that specialize in the industry will absolutely finance them. Expect advance rates closer to 70–85% (vs 80–95% for standard receivables) to leave room for disputes and retention.

Progress billings

Factors will fund AIA G702/G703 progress payments once architect-approved and signed by the GC.

Retainage

The 5–10% retention held until project completion is typically not advanced up-front — some factors will fund it separately at higher cost.

Lien waivers

You'll sign conditional and unconditional lien waivers with each draw; the factor needs assurance it isn't subordinate to a mechanic's lien.

Pay-when-paid

If your contract subordinates payment to the owner paying the GC, factors will price for that added risk (or decline).

Subcontractor factoring

Common play: subs factor GC-owed invoices to keep payroll and material bills current while waiting 60–90 days on the GC.

Building or subcontracting? See BizKred's construction funding page for the full menu of options — factoring, equipment financing, mobilization capital, and lines of credit.

How it works

How BizKred works

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Complete one simple intake with your business details, owner information, funding need, and recent bank statements.

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BizKred reviews your profile and routes it to third-party lenders or funding partners whose programs may fit your business.

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If lenders return offers, you review the terms and choose whether any option works for your business.

BizKred is your broker through the process — we connect, support, and guide. We do not make the final credit decision.

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Frequently asked questions

What is invoice factoring for small business?

You sell an unpaid B2B invoice to a factoring company for 80–95% of face value up-front. The factor collects from your customer and remits the remainder minus a fee (usually 1–5% per 30 days outstanding).

What's the difference between recourse and non-recourse factoring?

With recourse factoring, you buy the invoice back if your customer doesn't pay — cheaper but riskier. Non-recourse shifts customer credit risk to the factor, at a higher fee. Most small business factoring is recourse.

How do I qualify?

Factoring cares about your customers' creditworthiness, not yours. You need B2B (not consumer) invoices, clean receivables (no liens), and typical net-30 to net-90 terms. Personal FICO is rarely a gating factor.

How much does invoice factoring cost?

Discount rates run 1–5% per 30 days invoice outstanding. A 90-day invoice at a 2% monthly rate costs ~6% of face value. Advance rates typically 80–95%; construction is closer to 70–85%.

Can construction companies factor invoices?

Yes, but it's a specialty. Progress billing, retainage, lien waivers, and pay-when-paid clauses make construction receivables harder to fund. See the construction section below.

Will my customers know I'm factoring?

In notification factoring (the standard), yes — the factor sends a Notice of Assignment and payments are redirected. Non-notification factoring exists but is rare and priced higher.