What Is Invoice Financing?

Invoice financing, sometimes called receivables financing or factoring, is a type of asset-based lending where unpaid invoices act as collateral. With this option, businesses can receive advances of up to 85% of their invoice value. In contrast, invoice factoring allows lenders to purchase 100% of receivables and collect directly from your clients. While both methods provide fast access to working capital, factoring may impact cash flow since payments go through the funder instead of your business.

How to Qualify

Qualifying for invoice financing is simple—outstanding invoices are the main requirement. While approval is largely based on receivables, a healthier business with strong revenue and credit history can often secure better terms. Some providers also sync directly with accounting software to underwrite applications quickly with minimal paperwork.

Role of Accounting Software

Platforms like FundBox and BlueVine integrate with your accounting tools to review transactions and approve funding within minutes. This seamless connection makes it easier for businesses to access capital online without lengthy applications.

Understanding Outstanding Invoices

"Outstanding" refers to invoices that have been issued but not yet paid, not necessarily overdue. This financing is best suited for businesses with clients who pay on time. Keep in mind, funders do not chase late-paying customers—you must ensure your clients fulfill their obligations.

Where to Get Invoice Financing

Thanks to cloud accounting, invoice financing can be completed entirely online. Once your data is synced, transferring information and securing approval is fast and hassle-free. Top providers include BlueVine, TCI Business Capital, and Paragon Financial Group, each offering different rates, limits, and repayment structures.

Accounts Receivable Financing vs. Other Options

Invoice financing is quick and flexible but comes with fees. For example, $100,000 in invoices may give you an $85,000 advance, but after fees and a 1% weekly rate, your cost could reach $5,000 if vendors delay payment. Other funding options include equipment financing (using assets as collateral), merchant cash advances (based on card sales), business loans (lower rates but harder to qualify for), and business lines of credit (revolving funding with interest charged only on what you use).

Why It Matters

Improving your company’s working capital through invoice financing helps maintain smooth operations. Since funding is tied directly to incoming receivables, you’re borrowing against money already owed—keeping cash flow steady while you wait for clients to pay. For businesses seeking flexible, short-term funding, invoice financing can be a practical solution.