Stop waiting 30, 60, or 90 days for customers to pay. Accounts receivable financing converts your outstanding invoices into cash within 24 hours — so you can run your business, not chase payments.
Accounts receivable financing is a broad term for financing structures that use unpaid customer invoices as the primary asset. The core concept: you have done the work, delivered the goods, and issued the invoice — but your customer is not scheduled to pay for 30, 60, or 90 days. AR financing turns that future payment into immediate cash.
The two most common forms are invoice factoring and AR lines of credit. In invoice factoring, you sell specific invoices to a factoring company (called the factor) at a discount. The factor advances 70–95% of the invoice value immediately and collects from your customer directly when payment is due. When the customer pays, the factor remits the remaining balance minus their fee.
In an accounts receivable line of credit, you pledge your receivables as collateral for a revolving credit line. You draw funds against eligible invoices and repay as customers pay. This structure is more common for larger businesses with established banking relationships.
For most small and mid-sized businesses, invoice factoring through a specialized lender like Merchant Fund Express is the more accessible and faster option. It does not require years in business, strong personal credit, or substantial assets beyond the receivables themselves.
Your business delivers goods or services and issues an invoice — net-30, net-60, or net-90. The work is done. You are owed the money. The timing problem begins.
You upload the invoice and basic information about your client. The creditworthiness of your client (not just your business) is the primary evaluation factor.
After setup is complete (1–3 days for the first transaction), funds are advanced to your business account within 24 hours of invoice submission. You can use this capital immediately for payroll, operations, new orders, or any business purpose.
Your client pays the invoice (either to you or directly to the factoring company depending on the structure). Nothing changes on the client's end except the payment destination in some structures.
Once the invoice is collected, you receive the withheld reserve (typically 5–30% of invoice value) minus the factoring fee. Fees typically range from 1–5% of the invoice depending on terms and client creditworthiness.
| Feature | Invoice Factoring | AR Line of Credit | Working Capital Loan |
|---|---|---|---|
| Based on | Invoice value | Total AR balance | Revenue/cash flow |
| Speed | 24 hrs (after setup) | 1–2 weeks | 24–48 hrs |
| Requires strong credit? | Client's credit matters | Yes, borrower | Revenue-focused |
| Repayment | When client pays | As AR collected | Fixed daily/weekly |
| Best for | Specific slow invoices | Ongoing AR mgmt | General cash needs |
Construction businesses routinely face payment cycles of 60–90 days on completed work. General contractors and subcontractors must pay labor weekly and material suppliers on 30-day terms while waiting on owner or GC payment. Invoice factoring against progress billing and completion invoices directly solves this structural gap without requiring additional collateral beyond the receivable itself.
Staffing companies pay workers weekly but invoice clients on net-30 to net-60 terms. This creates a continuous, structural working capital gap: payroll goes out every week while invoices mature over 30–60 days. AR financing is the natural financing solution for the staffing industry — it converts the receivable generated by each placement cycle to immediate cash for the next payroll.
Freight brokers and owner-operators deliver loads for shippers who pay on 30–45 day terms. Fuel, maintenance, and driver pay are due immediately. Invoice factoring is standard practice in the trucking industry — the majority of freight brokers use some form of AR financing to bridge the delivery-to-payment gap.
Manufacturers that supply to retailers or distributors on net-60 or net-90 terms carry substantial working capital requirements to fund production before payment arrives. AR financing against purchase orders and delivery invoices allows manufacturers to fulfill orders without depleting operating reserves.
Law firms, accounting practices, engineering firms, and IT service companies frequently carry 60–120 days of receivables due to project billing cycles. AR financing converts completed project invoices to immediate working capital, reducing the gap between service delivery and cash availability.
AR financing fees are typically quoted as a percentage of the invoice face value, charged weekly or monthly until the invoice is collected. Common structures:
Fees vary based on invoice size (larger invoices carry lower rates), your client's creditworthiness, and your monthly factoring volume. The appropriate comparison is not to a bank loan rate — it is to the cost of the business problems that unpaid invoices create: missed payroll, supplier disputes, lost growth opportunities, and the stress of a cash gap that should not exist.
Accounts receivable financing (also called AR financing or invoice factoring) is a method of using your outstanding customer invoices as a basis for immediate funding. Instead of waiting 30–90 days for customers to pay, you convert those invoices to cash immediately — typically within 24 hours.
The terms are often used interchangeably. Invoice factoring involves selling your invoices outright to a factoring company. AR financing can also refer to an asset-based credit line secured by receivables where you retain ownership of the invoices. Merchant Fund Express offers both structures.
Typically 70–95% of the invoice face value is advanced immediately. The remaining amount (minus fees) is remitted when your customer pays. Merchant Fund Express offers AR financing from $5,000 to $2,000,000.
After an initial setup (usually 1–3 business days for the first transaction), subsequent invoice funding can happen within 24 hours.
In traditional factoring, customers are notified to pay the factoring company directly. In non-notification factoring, customers continue to pay you and you remit the funds. Ask your Merchant Fund Express specialist which structure is available for your situation.
Construction, staffing, transportation, manufacturing, wholesale distribution, professional services, and government contractors are among the most common users of AR financing due to their long payment cycles.
Factoring fees typically range from 1–5% of the invoice value depending on the creditworthiness of your customers, the invoice size, and the payment terms.
Your business generally needs 6+ months of operating history, invoices to creditworthy B2B or government customers, and invoices not pledged as collateral elsewhere. Personal credit is less important than the creditworthiness of your customers.
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