Invoice financing

What is invoice financing?

You upload invoices to the lender, draw against them, and repay each advance when your customer pays you. The invoices are the collateral, but the lender does not buy them and does not contact your customers. That is the key difference from invoice factoring, where the factor owns the invoice and collects it.

Online lenders dominate this product and often connect directly to your accounting software, so new invoices become available to draw against automatically. It is sometimes called accounts receivable financing or invoice discounting. For a direct comparison, read factoring versus invoice financing.

Who qualifies for invoice financing?

Because you remain responsible for collection and repayment, lenders look at both your business and your customers. Most want six months to a year in business, at least $50,000 a year in invoices to other businesses, and owner credit of 600 or higher. Customer quality matters most: large, slow paying but reliable customers are ideal.

• Declined most often: consumer invoices, invoices more than 90 days old, disputed or partially delivered work, and receivables already pledged under another lender's UCC lien.
• Businesses under six months old usually fit factoring better, since factors lean on the customer alone.
• If your customer base is mostly one account, expect a cap on how much of it the lender will fund.

What does invoice financing really cost?

A typical example: you draw 85% against a $100,000 invoice, so $85,000, at a fee of 1.5% per month. Your customer pays in six weeks. The fee is about 2.25% of the advance, or $1,900, and you keep the remaining $15,000 of the invoice as usual. As an annual rate, that is roughly 20% APR.

Many lenders quote a weekly fee instead, which hides the cost. A 1% weekly fee is over 50% a year. Add draw fees, monthly subscription fees and a higher fee once the invoice passes 30 days. Convert every quote to APR with the APR versus factor rate guide before you compare it with a line of credit.

How do you qualify, and what documents do you need?

Expect to provide an accounts receivable aging report, sample invoices with proof of delivery, a customer list, your formation documents, three to six months of bank statements and, for larger lines, a recent tax return and interim financials. Most online lenders also ask to connect your accounting software and bank account so they can verify invoices as you create them.

Our document checklist covers the full list. Clean invoicing is what gets approved: invoices with purchase order numbers, clear payment terms and a history of customers paying close to those terms. Overdue balances older than 90 days will be excluded and will lower your limit.

How long does invoice financing take?

Typically one to five business days to set up the facility, including verifying your customers and checking for existing liens. Once the line is open, draws against new invoices are usually funded the same day or the next business day.

Connecting your accounting software and bank directly shortens setup, since the lender can see the invoices and the payment history rather than waiting for uploads. If you need money inside 48 hours and have strong invoices, this is often the fastest product that is not a merchant cash advance. See how long business loans take for other options.

When should you choose something else?

Choose invoice factoring if your business is too new or your credit too weak for a lender to rely on you for repayment, or if you want someone else to chase collections. Choose a line of credit if you qualify at a bank, because the cost is usually half or less and it is not tied to specific invoices.

Avoid invoice financing if your customers routinely pay late or dispute invoices. Fees climb every week an invoice is outstanding, and a customer that pays at 120 days can turn a 20% APR product into a 40% one.

How do you apply for invoice financing?

Apply once on this site with your receivable aging and your application reaches invoice financing lenders, factoring companies and line of credit lenders that fit your size, so you can see all three costs together. It is free for your business, and we are paid the same whichever lender you choose. Or ask your AI assistant to apply through our MCP server: it reads your aging report and statements, fills the application and submits it.