Accounts Receivable Factoring for Small Businesses

Accounts receivable factoring helps turn unpaid customer invoices into working capital without waiting for customers to pay on their normal payment terms. Expansion Capital Group provides accounts receivable factoring, also known as invoice factoring or accounts receivable financing, to established U.S. businesses by advancing a percentage of eligible invoice value upfront.

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Accounts Receivable Factoring for Small Businesses

What is Accounts Receivable Factoring and How Does it Work?

Accounts receivable factoring, often called invoice factoring or accounts receivable financing, is a financial transaction where your business sells its accounts receivable (your unpaid invoices) to a factor, a third-party financial company. The factor advances a percentage of the total invoice value upfront, giving your business access to cash instead of waiting for customer payment terms.

The factor then takes over collecting payment from the customers who owe those invoices, so you can spend less time waiting on receivables and more time focused on running your business.

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Flexible

Weekly/daily payments

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Scalable

Offers from $5k-$500k

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Dependable

Over 40,000 small businesses funded

What are the Advantages?

  • Cash Flow | Convert your accounts receivable into cash instead of waiting on customer payment terms.
  • Improved Working Capital | Keep working capital available by accelerating collection on outstanding invoices.
  • No Debt Incurred | Access cash without taking on debt, since factoring is a sale of invoices, not a loan.
  • Credit Risk Mitigation | The factor assumes the credit risk of your business’s customers.

How Accounts Receivable Factoring Compares

Businesses researching accounts receivable factoring often compare it with a traditional business loan or line of credit. A business loan or line of credit typically considers your credit history and may require collateral, with approval influenced by your personal or business credit profile. Accounts receivable factoring instead focuses more heavily on the strength of your outstanding invoices and the customers responsible for paying them, which can make it an option for businesses with more limited credit histories.

Factoring works by selling an asset your business already has, its unpaid invoices, instead of borrowing money. That's why it doesn't add debt to your balance sheet the way a loan does. Factoring typically involves a fee taken from the invoice value. That fee covers the upfront advance and the collection service the factor provides on your behalf.

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Minimum Requirements

Accounts receivable factoring is designed for established businesses with strong outstanding invoices. To be eligible, your business generally needs:

  • At least 6 months in operation
  • At least $8,000 in monthly revenue
  • A personal FICO score of 500 or higher
  • An active business checking account

Additional underwriting criteria will apply. For more eligibility details, visit our Who We Fund page.

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FAQs

How Small Businesses Have Used Accounts Receivable Factoring Loans or Fundings

Small businesses use accounts receivable factoring to help close the gap between completing the work and getting paid for it. Instead of waiting 30, 60, or 90 days on a customer's payment terms, factoring can turn outstanding invoices into working capital the business can use sooner.

A manufacturing business waiting on payment from a large customer might use factoring to help keep production moving and cover payroll while the invoice remains outstanding. That can give the business more room to prepare for the next order without relying entirely on the timing of the previous customer's payment.

A business services company managing several client contracts with different payment schedules might use factoring to help smooth out cash flow between invoices. That additional working capital can help the business continue covering operating expenses or taking on new work while existing customer invoices remain unpaid.

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