How It Works: Get Funded in 3 Simple Steps
You send a quote request, the lending partner approves and funds, and your customer pays the lending partner. Approval comes the same day, new accounts close in 2–5 days, and you add no debt to your balance sheet.
- ✓Step 1: request your quote; a specialist forwards it the same day.
- ✓Step 2: the lending partner approves and advances 70%–90%.
- ✓Step 3: your customer pays; you receive the reserve minus the fee.
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Message a SpecialistExecutive Summary: How Invoice Factoring Works
What it is: How invoice factoring works is defined by three steps: you request a quote, the lending partner approves your account and advances against your invoices, and your customer pays the lending partner, which then releases your reserve minus the fee. IFXI’s lending partner is the factoring company that reviews, approves and funds the requests IFXI forwards.
The numbers: Approval: same day · Closing: 2–5 days · Funding on an active account: same day or 24 hours · Advance: 70%–90% · Fee: 1%–3% per period · Estimated minimum monthly volume: $50,000.
Key constraints: Only B2B invoices qualify. Your customers pay the lending partner under a Notice of Assignment, and the lending partner files a UCC-1 on your receivables. Same-day funding applies to active accounts only.
The Fast Facts on Invoice Factoring
What happens after I submit a factoring request?
The short answer is that an IFXI specialist reviews your request and forwards it to the lending partner the same day. The lending partner reviews your file, approves the same day on a complete application and closes your account in 2–5 days.
Who does my customer pay when I factor an invoice?
The short answer is the lending partner. A Notice of Assignment tells your customer to pay it, and the lending partner releases your reserve minus the fee once the payment clears.
How long does it take to get funded?
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.
Cash flow gaps invoice factoring can close
Customers pay on net-60
You delivered the work and sent the invoice, and the cash arrives two months later. Payroll and suppliers cannot wait that long.
A bigger contract needs cash first
A new customer doubles your volume on longer terms. The work starts before the first payment arrives.
A loan takes weeks
Bank applications ask for years of statements and collateral. Factoring turns invoices you already earned into cash.
Step 1: Request your quote
What you send
The quote form asks for your volume, invoice size, terms and customers. The full factoring application adds your accounts receivable aging report and sample invoices.
What the specialist does
An IFXI specialist reviews your quote request, gathers what the lending partner needs, and forwards it the same day. The lending partner manages your account after funding.
What decides the quote
Your customers’ credit, volume, invoice terms and recourse structure set your advance and fee. See factoring rates and recourse and non-recourse factoring.
Step 2: The lending partner approves & funds
Review and approval
The lending partner runs its due diligence: entity documents, a UCC search, tax status and customer credit. Approval comes the same day on a complete application.
Account setup
Account setup covers the factoring agreement, the UCC-1 filing and Notices of Assignment. Your account closes in 2–5 days.
Verification and the advance
You submit a schedule of accounts; the lending partner completes invoice verification and advances 70%–90%, same day or within 24 hours once your account is active.
Step 3: Your client pays the lending partner
Payment under the notice
Your customer pays the lending partner on its usual terms. Under UCC §9-406, a customer with the notice settles the invoice only by paying as the notice directs.
Reserve release
After the payment clears, the reserve release pays you the held-back balance minus the 1%–3% fee.
If a customer does not pay
Under recourse, you buy back the unpaid invoice. Non-recourse covers nonpayment for a reason the agreement covers, such as your customer’s insolvency. Questions? See the FAQ.
The three steps at a glance
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.
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% of each invoice.
Reserve rebate
When your customer pays, the lending partner releases the reserve minus the 1%–3% fee.
Funding timeline for invoice factoring
| Stage | Typical Timeframe |
|---|---|
| Quote request submitted | Day 0; a specialist forwards it the same day |
| Approval | Same day on a complete application |
| Agreement, UCC-1 filing and Notices of Assignment | 2–5 days to close |
| Funding on an active account | Same day or within 24 hours |
| Reserve released | After your customer’s payment clears, minus the fee |
Timeline notes for invoice factoring
- ✓Same-day funding applies once your account is active.
- ✓Your customers pay the lending partner under a Notice of Assignment.
- ✓The lending partner files a UCC-1 financing statement on your receivables.
- ✓You see the 1%–3% fee range before you factor.
Who qualifies for invoice factoring and what you need
| Requirement | What qualifies | Notes |
|---|---|---|
| Invoice type | B2B invoices for delivered goods or completed work | Consumer invoices do not qualify. |
| Customer credit | Commercial or government customers with acceptable credit | The lending partner checks each customer. |
| Invoice age | Current invoices | Invoices past due more than 90 days do not qualify. |
| Existing liens | No UCC lien from another lender on your receivables | A tax lien gets a case-by-case review and does not rule you out. |
| Volume | Estimated $50,000 a month minimum | No maximum. |
| Your credit | No minimum credit score | The 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 Costs | What 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 $15,000 invoice
| Line | Amount |
|---|---|
| Invoice face value | $15,000 |
| Advance at 85% | $12,750 |
| Reserve held (15%) | $2,250 |
| Factoring fee at 2% | $300 |
| Reserve released after your customer pays | $1,950 |
| You receive in all | $14,700 |
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)
| Feature | Invoice Factoring | Bank Line of Credit | Merchant Cash Advance (MCA) |
|---|---|---|---|
| Typical Approval Speed | Same day | Estimated 2–8 weeks | 1–3 days |
| Min. Credit Score Requirement | None: approval rests on your customers | Estimated 650–700+ (owner personal) | Estimated 500+ (owner personal) |
| Maximum Advance Rate | 70%–90% of invoice face value | Variable (% of collateral or assets) | Estimated 70%–80% of monthly revenue |
| Debt Added to Balance Sheet? | No: you sell a receivable | Yes: revolving debt liability | Yes: recorded as a liability |
| Hidden Fees / Covenants | 1%–3% per period, shown before you factor | Origination, maintenance, annual review, covenants | Factor rates, daily ACH debits, prepayment penalties (Variable/Estimated) |
| Best For | B2B businesses waiting on net-30 to net-90 invoices | Established companies with strong financials and collateral | Businesses 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).
- ✗Your customers see the arrangement. They pay the lending partner under a Notice of Assignment.
- ✗Recourse leaves the credit loss with you. You buy back an invoice your customer does not pay.
- ✗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
No long-term contracts
The lending partner’s agreement has no long-term contract.
Transparent fees
You see the 1%–3% fee range before you factor.
An IFXI specialist on your request
An IFXI specialist reviews your quote request and forwards it the same day. Compare brokered factoring.
Funding scenarios for the invoice factoring process
Oilfield services firm opens an account
- Funding Amount
- $90,000
- Industry
- Oilfield services
- Customer Type
- Regional operators
- Funding Type
- Invoice factoring
- Invoice Terms
- Net-60
- Advance Rate
- 85%
Two operators owed $90,000 on net-60 terms, and crew payroll was due in ten days.
The SolutionThe request went out the same day; the account closed in four days and the invoices funded once it was active.
Result$76,500 advanced to cover payroll.
Printer adds ongoing invoices
- Funding Amount
- $25,000
- Industry
- Commercial printing
- Customer Type
- Marketing agencies
- Funding Type
- Invoice factoring
- Invoice Terms
- Net-45
- Advance Rate
- 80%
An active account holder had $25,000 in new agency invoices and a paper order to pay.
The SolutionThe invoices funded the same day on the active account.
Result$20,000 advanced the same day.
Manufacturer collects its reserve
- Funding Amount
- $50,000
- Industry
- Machined parts
- Customer Type
- Industrial distributors
- Funding Type
- Invoice factoring
- Invoice Terms
- Net-30
- Advance Rate
- 90%
A distributor paid a $50,000 invoice, and the company wanted to see what came back.
The SolutionThe lending partner deducted a 2% fee from the $5,000 reserve.
Result$45,000 advanced up front; $4,000 released after the $1,000 fee.
Where IFXI arranges invoice factoring
Texas, Florida, New York, Illinois, Georgia, Ohio, and Pennsylvania.
Frequently asked questions about the invoice factoring process
How does invoice factoring work step by step?
The short answer is three steps: you request a quote and an IFXI specialist forwards it the same day; the lending partner approves, closes your account in 2–5 days and advances 70%–90%; your customer pays the lending partner, which releases the reserve minus the fee.
What happens after I submit a factoring request?
The short answer is that an IFXI specialist reviews your request, gathers what the lending partner needs and forwards it the same day. The lending partner reviews your file and approves the same day on a complete application.
Who does my customer pay when I factor an invoice?
The short answer is the lending partner. A Notice of Assignment directs your customer to pay it, and under UCC §9-406 the customer settles the invoice only by paying as the notice directs.
What is the role of the IFXI specialist?
The short answer is that the specialist reviews your quote request, gathers what the lending partner needs and forwards your file. The lending partner reviews, approves, funds and manages your account after funding.
How much do I receive on a $15,000 invoice?
The short answer is that you receive $14,700 on a $15,000 factored invoice at an 85% advance and a 2% fee. You receive $12,750 up front, and $1,950 comes back from the reserve after the $300 fee. At 1% to 3% the fee runs $150 to $450.
How long until my new account is funded?
The short answer is that a new invoice factoring account closes in 2–5 days after same-day approval. After that, invoices you submit fund the same day or within 24 hours.
Do my customers know I use factoring?
The short answer is yes: your customers receive a Notice of Assignment and pay the lending partner. The notice is a standard step in factoring.
Sources
- UCC §9-406, discharge of account debtor after notice of assignment (Cornell Law School, Legal Information Institute)
- UCC §9-109, scope of Article 9, including sales of accounts (Cornell Law School, Legal Information Institute)
General information about how invoice factoring works. Rates, advance amounts and approval come from IFXI’s lending partner after its review and can change.
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