Invoice Factoring for Small Business: How It Works and Who Qualifies

Invoice Factoring

Invoice factoring means selling your unpaid invoices to a factoring company for cash now. The factor advances most of the invoice value, collects from your customer, then pays you the rest minus its fee. Through Kapitus's network, lines run from $200,000 to $7 million, with funding in as little as 4 business days.

Last updated October 12, 2026

At a glance

Factoring line	$200,000 to $7,000,000
Invoice payment terms	30 to 120 days
Funding	In as little as 4 business days
Who it is for	Businesses that sell to other businesses or to government
Invoice age	Outstanding 30 to 90 days
Decision based on	Mainly your customers' credit
Collateral	The invoices. A UCC filing is required.

Figures are what Kapitus publishes for invoice factoring through its network, checked October 12, 2026. Kapitus does not publish advance rates or fees. Each factoring company sets its own terms.

How invoice factoring works

You deliver goods or services and invoice your customer.
You sell that invoice to a factoring company.
The factor advances you a percentage of the invoice value.
Your customer pays the factor.
The factor sends you the remainder, minus its fee.

You get most of your money in days. You do not wait 30, 60, or 90 days for the customer.

Who it is for

Factoring fits businesses that:

Sell to other businesses or to government agencies
Invoice on terms of 30 days or longer
Have customers with good credit
Are growing faster than their cash allows

Common users include staffing agencies, trucking companies, manufacturers, wholesalers, and government contractors.

What a factor looks at

Your customers matter more than you do. A factor wants to know:

Are your customers creditworthy?
Are the invoices valid, for work already delivered?
Are the invoices free of other liens?
How old are they? Invoices outstanding 30 to 90 days are the target.

Expect to provide an accounts receivable aging report, your articles of incorporation, and business bank account details.

What it costs

Two numbers set your cost:

The advance rate. The share of the invoice you receive up front.
The factoring fee. What the factor keeps. It usually rises the longer the invoice stays unpaid.

Kapitus does not publish either number for its network, and we will not guess. Ask every factor for both in writing, plus any setup, minimum-volume, or termination fees.

Questions to ask before you sign

Recourse or non-recourse? With recourse, you buy back invoices your customer never pays. Without it, the factor takes that loss and charges more.
Do I have to factor every invoice, or can I choose?
Is there a monthly minimum?
How long is the contract, and what does it cost to leave?
How will you contact my customers?

When it fits

Slow-paying customers are the only thing holding back your cash flow.
Your own credit is thin but your customers’ credit is strong.
You need to make payroll before a large customer pays.

When it does not

You sell to consumers.
Your margins are thin. The fee comes straight out of each invoice.
You do not want a third party contacting your customers.

How to apply

Fill out our short form.
Complete the application and send your aging report.
The factor reviews your customers and invoices.
Agree on the advance rate and fees.
Submit invoices and receive your advance.

Sources

Kapitus: Invoice Factoring, checked October 12, 2026

Common questions

Is invoice factoring a loan?

No. You are selling an asset, your receivables. Kapitus describes it as a transaction, not a loan, so it does not add debt to your balance sheet.

Will my customers know I am factoring?

Usually, yes. The factoring company collects payment from your customers directly, so they are told where to send it.

Can I qualify with weak credit?

Often. Factors care most about whether your customers pay their bills. Kapitus notes that many factoring companies work with businesses that have less-than-perfect credit, and that startups can use factoring.

What does factoring cost?

The factor keeps a fee from each invoice. The fee usually grows the longer your customer takes to pay. Kapitus does not publish its network's fees, so get the fee schedule in writing.

Do consumer invoices qualify?

No. Invoices must be owed by a business or a government agency, for goods or services already delivered, and free of other liens.

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