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What Is Factoring Finance?
Factoring finance is a type of business funding where a company converts its outstanding invoices into immediate cash by selling them to a finance provider — known as a factor. Rather than waiting weeks or months for customers to pay, the business receives most of the invoice value upfront.
Factoring finance is widely used by small and medium businesses in industries with long payment cycles, including construction, recruitment, manufacturing, and professional services.
How Does Factoring Finance Work?
- Your business delivers goods or services and issues an invoice to a customer.
- You sell that invoice to a factoring finance provider and receive an advance — typically 70–90% of the invoice value.
- The factoring provider manages collection of payment from your customer.
- When the customer pays, the factoring provider releases the remaining balance minus their fee.
Types of Factoring Finance
Recourse Factoring
The most common form. If your customer doesn't pay, you are liable to repay the advance to the factoring company.
Non-Recourse Factoring
The factoring company absorbs the risk of non-payment. This typically comes with higher fees.
Selective Factoring
You choose which invoices to factor, rather than assigning your entire ledger. Fundtap operates on this model — fund only the invoices you need, when you need them.
Is Factoring Finance Right For Your Business?
Factoring finance works best for businesses that:
- Invoice other businesses (B2B)
- Have customers with payment terms of 30+ days
- Have consistent invoice volumes
- Need working capital without taking on traditional debt
If you want flexibility and privacy — funding only the invoices you need without customer notification — Fundtap is worth considering as a modern alternative.
Factoring finance is when a business sells its unpaid invoices to a finance company in exchange for immediate cash. The finance company then collects payment from the business's customers.
Factoring finance fees typically range from 1–5% of the invoice value per month. Additional admin fees and minimum volume charges may apply. Fundtap charges a single fee from 4% with no monthly fees.
Factoring finance is not a loan — you are selling invoices you have already earned. This means it does not add debt to your balance sheet and approval is based on your customers' creditworthiness, not just yours.
Factoring finance is common in construction, manufacturing, logistics, recruitment, wholesale, and professional services — industries where long payment terms are standard.
Selective factoring lets you choose which invoices to fund, rather than assigning your entire debtor ledger. Fundtap operates on this model with no minimums or lock-ins.