Invoice Factoring FAQ: Your Questions, Answered

Invoice Factoring FAQ: Quick Answers

Short answers on fees, approval, credit, contracts and what happens after your customer pays. Approval comes the same day, the fee runs 1%–3% per period, and you add no debt to your balance sheet.

  • ✓Advance: 70%–90% of each invoice.
  • ✓Fee: 1%–3% per period, shown before you factor.
  • ✓No minimum credit score; tax liens reviewed case by case.
Same DayApproval on a complete application
2–5 DaysTo close a new account
1%–3%Factoring fee per period

Start with your own numbers

Your own figures give the quickest answer to what factoring would cost you, with no obligation.

Executive Summary: Invoice Factoring FAQ

1

What it is: Invoice factoring is defined as selling unpaid B2B invoices to a factoring company for an upfront advance. Through IFXI, the lending partner advances 70%–90% of each invoice, collects from your customer and releases the reserve minus a fee. This FAQ answers the questions business owners ask most before they factor.

2

The numbers: Advance: 70%–90% · Fee: 1%–3% per period · Approval: same day · Closing: 2–5 days · Funding on an active account: same day or 24 hours · Minimum credit score: none · Estimated minimum monthly volume: $50,000.

3

Key constraints: Only B2B invoices qualify. Your customers pay the lending partner under a Notice of Assignment, and a UCC-1 goes on file. Recourse or non-recourse terms decide who carries a customer’s nonpayment.

The Fast Facts on Invoice Factoring

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Is invoice factoring a loan?

The short answer is no: you sell an invoice you already earned, so no loan or repayment schedule goes on your balance sheet. Read invoice factoring for the full mechanics.

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How fast do I get funded?

The short answer is 2–5 days to close a new account after same-day approval, then same day or within 24 hours for invoices on an active account. See how it works.

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What does factoring cost?

The short answer is 1% to 3% of the invoice face value for each period it stays unpaid, taken from the reserve. See factoring fee details and a worked example.

Cash flow gaps invoice factoring can close

Slow-paying customers

Net-45 and net-60 terms leave earned revenue sitting in receivables while payroll and suppliers wait.

A bigger contract

A new customer on longer terms doubles your volume before the first payment arrives.

Expensive short-term debt

A cash advance with daily debits looks fast and costs more each week it runs.

Invoice factoring in three sentences

You sell the invoice

You submit B2B invoices for completed work, and the lending partner advances 70%–90% of face value.

Your customer pays the lending partner

A Notice of Assignment directs your customer to pay the lending partner. Recourse or non-recourse factoring terms decide who carries nonpayment.

You receive the reserve

The lending partner releases the reserve minus the 1%–3% fee. Check the eligibility requirements before you request a quote.

How to get funded with invoice factoring in 3 steps

1

Request your quote

Enter your volume, invoice size and terms in the quote form. An IFXI specialist reviews your request and forwards it the same day.

2

Approve & fund

The lending partner verifies your invoices and checks your customers’ credit. Approval comes the same day, your account closes in 2–5 days, and you receive 70%–90%.

3

Reserve rebate

When your customer pays, the lending partner releases the reserve minus the 1%–3% fee.

How money moves in invoice factoring: you request a quote, an IFXI specialist forwards it, the lending partner advances 70% to 90% of the invoice, your customer pays the lending partner, and you receive the reserve minus the fee.YouIFXI specialistLending partnerYour customer1. Quote request2. Forwarded same day3. Advance of 70%–90%You invoice as usual4. Pays the lending partner

Funding timeline for invoice factoring

StageTypical Timeframe
Quote request submittedDay 0
ApprovalSame day on a complete application
Account setup and UCC-1 filing2–5 days to close
Funding on an active accountSame day or within 24 hours
Reserve releasedAfter your customer’s payment clears, minus the fee

Timeline notes for invoice factoring

  • ✓Same-day funding applies once your account is active.
  • ✓You see the 1%–3% fee range before you factor.
  • ✓The lending partner files a UCC-1 on your receivables.

Who qualifies for invoice factoring and what you need

RequirementWhat qualifiesNotes
Invoice typeB2B invoices for delivered goods or completed workConsumer invoices do not qualify.
Customer creditCommercial or government customers with acceptable creditThe lending partner checks each customer.
Invoice ageCurrent invoicesInvoices past due more than 90 days do not qualify.
Existing liensNo UCC lien from another lender on your receivablesA tax lien gets a case-by-case review and does not rule you out.
VolumeEstimated $50,000 a month minimumNo maximum.
Your creditNo minimum credit scoreThe application authorizes business and personal credit reports.

Quote documents for invoice factoring

  • ✓Accounts receivable aging report.
  • ✓Sample invoices with proof of delivery or completion.
  • ✓Customer list with payment terms.
  • ✓Business formation documents, owner ID and a voided check.

What delays funding: missing proof of delivery, a customer dispute, and an undisclosed lien on your receivables.

Transparent Costs for Invoice Factoring

What to Expect in CostsWhat Affects the Costs
Advance rate: 70%–90% of invoice face value.

Factoring fee: 1%–3% per period.

Reserve: released minus the fee when your customer pays.		Customer credit: stronger customers earn better terms.

Invoice terms: longer terms add periods.

Recourse: non-recourse prices toward the high end.

See pricing.

Worked example: a $10,000 invoice

LineAmount
Invoice face value$10,000
Advance at 85%$8,500
Reserve held (15%)$1,500
Factoring fee at 2%$200
Reserve released after your customer pays$1,300
You receive in all$9,800

Illustrative example inside the published ranges. Your quote sets your actual advance rate and fee.

Invoice Factoring vs. Bank Line of Credit vs. Merchant Cash Advance (MCA)

FeatureInvoice FactoringBank Line of CreditMerchant Cash Advance (MCA)
Typical Approval SpeedSame dayEstimated 2–8 weeks1–3 days
Min. Credit Score RequirementNone: approval rests on your customersEstimated 650–700+ (owner personal)Estimated 500+ (owner personal)
Maximum Advance Rate70%–90% of invoice face valueVariable (% of collateral or assets)Estimated 70%–80% of monthly revenue
Debt Added to Balance Sheet?No: you sell a receivableYes: revolving debt liabilityYes: recorded as a liability
Hidden Fees / Covenants1%–3% per period, shown before you factorOrigination, maintenance, annual review, covenantsFactor rates, daily ACH debits, prepayment penalties (Variable/Estimated)
Best ForB2B businesses waiting on net-30 to net-90 invoicesEstablished companies with strong financials and collateralBusinesses with card sales and no invoices

When invoice factoring is not the right fit

  • ✗It costs more than a bank line on an annual basis. A 2% fee on a 30-day invoice works out to about 24% a year (2% × 12 periods).
  • ✗You bill consumers. Only B2B invoices qualify.
  • ✗Your customers see the arrangement. They pay the lending partner under a Notice of Assignment.
  • ✗A UCC-1 goes on file. Article 9 of the UCC covers sales of accounts, so the filing can block other financing secured by your receivables.

How IFXI handles your request for invoice factoring

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No long-term contracts

The lending partner’s agreement has no long-term contract.

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Transparent fees

You see the 1%–3% fee range before you factor.

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An IFXI specialist on your request

An IFXI specialist reviews your quote request and forwards it the same day. See what a factoring broker does for comparison.

Funding scenarios for invoice factoring

Illustrative example · October 2026 · San Antonio, TX

Security firm covers guard payroll

Funding Amount
$60,000
Industry
Commercial security
Customer Type
Property management companies
Funding Type
Invoice factoring
Invoice Terms
Net-45
Advance Rate
85%
The Problem

Weekly guard payroll came due while $60,000 sat on net-45 terms.

The Solution

The lending partner advanced against the approved invoices once the account was active.

Result

$51,000 advanced before payroll.

Illustrative example · July 2026 · Orlando, FL

Event supplier funds a busy season

Funding Amount
$40,000
Industry
Event equipment rental
Customer Type
Convention centers and planners
Funding Type
Invoice factoring
Invoice Terms
Net-30
Advance Rate
80%
The Problem

Peak-season rentals billed $40,000 to venues, and crews needed pay before the venues paid.

The Solution

The company factored the venue invoices and kept the rest of its billing.

Result

$32,000 advanced; the reserve came back after the venues paid.

Illustrative example · June 2026 · Albany, NY

Engineering firm with a tax lien

Funding Amount
$75,000
Industry
Civil engineering
Customer Type
Municipal agencies
Funding Type
Invoice factoring
Invoice Terms
Net-60
Advance Rate
80%
The Problem

An open tax lien and $75,000 in municipal invoices on net-60 terms.

The Solution

The owner disclosed the lien, and the lending partner reviewed it case by case.

Result

$60,000 advanced on the municipal invoices.

Where IFXI arranges invoice factoring

We connect B2B businesses with invoice factoring in:
Texas, Florida, New York, Illinois, Georgia, Ohio, and Pennsylvania.

Getting started

What is invoice factoring and how is it different from a loan?

Invoice factoring is defined as selling unpaid B2B invoices for an upfront advance of 70% to 90%. A loan adds debt you repay with interest; factoring converts revenue you already earned, and the cost is a 1% to 3% fee per period.

The short answer is that a new invoice factoring account closes in 2–5 days after same-day approval. Once your account is active, invoices you submit fund the same day or within 24 hours.

The short answer is an accounts receivable aging report, sample invoices with proof of delivery or completion, a customer list with terms, business formation documents, owner ID and a voided check. Your specialist tells you if the review needs anything else.

The short answer is completed, undisputed B2B invoices owed by creditworthy customers, not past due more than 90 days and not pledged to another lender. Consumer and related-party invoices do not qualify.

Fees, rates & contracts

How is the factoring fee calculated?

The factoring fee is defined as a percentage of an invoice’s face value for each period it stays unpaid, 1% to 3% with the lending partner. It comes out of the reserve when your customer pays; on a $10,000 invoice at 2%, the fee is $200.

The short answer is 70% to 90% of invoice face value. Your customers’ credit, your invoice terms and your monthly volume set where you land, and your quote shows it.

The short answer is that factoring a $10,000 invoice costs $200 at a 2% fee. At an 85% advance you receive $8,500 up front and $1,300 from the reserve, $9,800 in all.

The short answer is no: the lending partner’s agreement has no long-term contract. You see the fee range before you factor.

The short answer is that the lending partner’s agreement sets which customers and invoices you submit. Ask your specialist, and check the agreement before you sign.

Credit & approval

Does factoring affect my credit?

The short answer is that factoring sells a receivable, so it adds no loan to your balance sheet. The application authorizes business and personal credit reports, and the UCC-1 filing appears in public records.

The short answer is no: invoice factoring has no minimum credit score, and your credit score does not decide approval. The lending partner checks your customers’ credit and your invoices.

Yes, you can apply with a tax lien: the lending partner reviews it case by case, and it does not rule you out. Disclose the lien and any payment plan at application.

During factoring

Do my customers know I use factoring?

The short answer is yes: your customers receive a Notice of Assignment and pay the lending partner. Under UCC §9-406, a customer with the notice settles the invoice only by paying as the notice directs.

The short answer is that you forward the payment to the lending partner. Once the invoice is assigned, the payment belongs to the lending partner under your agreement.

The short answer is that your factoring agreement decides. Under recourse, you buy back the unpaid invoice; non-recourse covers nonpayment for a reason the agreement covers, such as your customer’s insolvency.

Ending the relationship

How do I stop factoring?

The short answer is that the lending partner’s agreement has no long-term contract. When you stop, open invoices settle as your customers pay, and the reserve comes back minus the fee.

The short answer is that the lending partner releases its UCC-1 once the account is settled. Until then, the filing secures its interest in your receivables.

Sources

General information about invoice factoring. Rates, advance amounts and approval come from IFXI’s lending partner after its review and can change.

Ready to unlock your cash flow?

Fill out the instant quote form at the top of the page to get started. There is no obligation and no long-term contract.

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