Manufacturing Factoring: Turn OEM Invoices Into Working Capital
Turn invoices owed by OEMs and distributors into cash for raw materials and payroll. Approval comes the same day, new accounts close in 2–5 days, and you add no debt to your balance sheet.
- ✓Advance: 70%–90% of each shipped invoice.
- ✓Fee: 1%–3% per period, shown before you factor.
- ✓Works with purchase order financing on large orders.
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Message a SpecialistExecutive Summary: Manufacturing Factoring
What it is: Manufacturing factoring is defined as invoice factoring for invoices owed by OEMs and distributors on net-60 and net-90 terms. Manufacturing covers machining, fabrication, molding, assembly and other production sold to businesses.
The numbers: Advance: 70%–90% of each invoice · Fee: 1%–3% per period · Approval: same day; closing: 2–5 days · Volume: estimated $50,000 a month.
Key constraints: Invoices must cover goods shipped and accepted by a business with acceptable credit. Bill-and-hold invoices for goods still in your plant do not qualify.
The Fast Facts on Manufacturing Factoring
What is manufacturing factoring?
The short answer is that you sell invoices owed by OEMs and distributors for an advance of 70%–90%, and the customer pays the lending partner on its normal terms.
Can I combine factoring with PO financing?
Yes, you can: purchase order financing pays your supplier, and factoring advances the invoice after you ship.
What if I need a larger line?
The short answer is that receivables, inventory and equipment together can support asset-based lending.
Cash flow gaps manufacturing factoring can close
OEMs pay on net-90
Your largest customers pay in 90 days while steel, resin and labor are due now.
A big order needs materials
A new contract calls for raw materials and overtime before the first shipment.
Payment slips after inspection
A part held at incoming inspection pushes the payment clock back.
How manufacturing factoring works on OEM invoices
The documents the lending partner reads
Your invoice, the customer’s purchase order, the packing slip and a signed bill of lading show the parts shipped as ordered.
Who pays whom: manufacturing factoring
You receive the advance. The OEM or distributor pays the lending partner under a Notice of Assignment, and you receive the reserve minus the fee.
Fits and limits: manufacturing factoring
Contract manufacturers and job shops selling to OEMs fit best. Heavy concentration in one OEM? Compare recourse and non-recourse factoring, and see pricing for fee drivers.
How to get funded with manufacturing factoring in 3 steps
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%.
Reserve rebate
When your customer pays, the lending partner releases the reserve minus the 1%–3% fee.
Funding timeline for manufacturing factoring
| Stage | Typical Timeframe |
|---|---|
| Quote request submitted | Day 0 |
| Approval | Same day on a complete application |
| Account setup and UCC-1 filing | 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 manufacturing 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 manufacturing 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 manufacturing 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 existing lien on your receivables.
Transparent Costs for Manufacturing 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 $90,000 invoice
| Line | Amount |
|---|---|
| Invoice face value | $90,000 |
| Advance at 85% | $76,500 |
| Reserve held (15%) | $13,500 |
| Factoring fee at 2% | $1,800 |
| Reserve released after your customer pays | $11,700 |
| You receive in all | $88,200 |
Illustrative example inside the published ranges. Your quote sets your actual advance rate and fee.
Manufacturing Factoring vs. Bank Line of Credit vs. Merchant Cash Advance (MCA)
| Feature | Manufacturing 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 manufacturing factoring is not the right fit
- ✗Your goods have not shipped. Bill-and-hold invoices do not qualify.
- ✗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.
- ✗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 manufacturing 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.
Funding scenarios for manufacturing factoring
Machine shop buys bar stock
- Funding Amount
- $140,000
- Industry
- Precision machining
- Customer Type
- Automotive OEM
- Funding Type
- Invoice factoring
- Invoice Terms
- Net-90
- Advance Rate
- 85%
A $140,000 invoice to an OEM sat on net-90 while bar stock was due.
The SolutionThe shop factored the invoice once its account was active.
Result$119,000 advanced.
Fabricator takes a larger contract
- Funding Amount
- $90,000
- Industry
- Steel fabrication
- Customer Type
- Industrial equipment distributor
- Funding Type
- Invoice factoring
- Invoice Terms
- Net-60
- Advance Rate
- 80%
A new contract needed steel and overtime before the second shipment.
The SolutionThe fabricator factored each shipped invoice to fund the next run.
Result$72,000 advanced.
Plastics molder covers resin
- Funding Amount
- $60,000
- Industry
- Injection molding
- Customer Type
- Appliance manufacturer
- Funding Type
- Invoice factoring
- Invoice Terms
- Net-75
- Advance Rate
- 90%
Resin suppliers wanted payment on 30 days while the customer paid on 75.
The SolutionThe molder factored its invoices after each delivery.
Result$54,000 advanced.
Frequently asked questions about manufacturing factoring
What is manufacturing factoring and how does it work?
Manufacturing factoring is defined as invoice factoring for invoices owed by OEMs and distributors on net-60 and net-90 terms. You receive 70% to 90% after you ship, the customer pays the lending partner, and you receive the reserve minus the fee.
How fast can I get funded with manufacturing factoring?
The short answer for manufacturing factoring is same-day approval on a complete application and 2–5 days to close a new account. Once your account is active, invoices you submit fund the same day or within 24 hours.
Who qualifies for manufacturing factoring?
The short answer is a manufacturer with B2B invoices for completed work, customers with acceptable credit and an estimated $50,000 in monthly volume. There is no minimum credit score, and a tax lien gets a case-by-case review.
Which manufacturing invoices are not eligible?
The short answer is bill-and-hold invoices for goods not shipped, invoices for goods rejected at inspection, disputed invoices and invoices past due more than 90 days.
Can I use factoring and purchase order financing together?
Yes, you can use both on one order: PO financing pays your supplier up to 100% of verified cost, and after delivery the invoice advance brings the total to 70% to 90% of the order.
How much does factoring a $90,000 invoice cost?
The short answer is that factoring a $90,000 invoice costs $1,800 at a 2% fee. At an 85% advance you receive $76,500 up front and $11,700 from the reserve, $88,200 in all. At 1% to 3% the fee runs $900 to $2,700.
Do my customers know I use factoring?
The short answer is yes: your customers pay the lending partner under a Notice of Assignment. Under UCC §9-406, a customer with the notice settles the invoice only by paying as the notice directs.
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 manufacturing factoring. Rates, advance amounts and approval come from IFXI’s lending partner after its review and can change.
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