Financing is often slightly cheaper because you keep the collection work. Factoring bundles a service into the fee, which is worth paying for if you would otherwise have to build that function.

Head to head

Invoice factoring vs Invoice financing

The same asset, two different transactions. Factoring sells the invoice. Financing borrows against it and leaves it on your books.

	Invoice factoring	Invoice financing
Typical amount	$10,000 to $10 million+	$10,000 to $5 million
Cost	1%-5% per 30 days of the invoice face value	1%-3% per 30 days plus interest
Time to funding	1 day to 1 week after setup	1 day to 1 week
Term	Per invoice, typically 30-90 days	Revolving against the ledger
Relative expense	$$$$	$$$$

Cost bands are editorial judgements expressed in APR-equivalent terms so products quoting factor rates and discount fees can be compared with products quoting interest. They indicate relative expense, not quotes. Methodology.

Invoice factoring

Usually chosen when

You would rather the factor handled collections
Your own collections function is thin
Qualifying matters more than confidentiality, and factoring is generally easier to qualify for

How factoring works

Invoice financing

Usually chosen when

Customer relationships are delicate and must not involve a third party
Your collections already work well
You want an ongoing facility against the whole ledger rather than invoice by invoice

How invoice financing works

Common questions

Which is cheaper?: Financing is often slightly cheaper because you keep the collection work. Factoring bundles a service into the fee, which is worth paying for if you would otherwise have to build that function.

Other comparisons

Factoring vs MCA

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