Invoice factoring converts eligible business-to-business receivables into near-term working capital. Instead of waiting through customer payment terms, a business may sell or finance approved invoices through a factor or accounts-receivable lender.
Sierra Capital Advisory helps businesses compare factoring structures, understand the operational impact and identify whether receivables financing fits their cash-flow cycle.
Businesses That May Benefit From Invoice Factoring
- Staffing and temporary labor companies
- Transportation and logistics businesses
- Manufacturers and distributors
- Government contractors
- Business-service providers with creditworthy commercial customers
- Healthcare and medical-service companies with eligible receivables
How Invoice Factoring Works
The factor reviews the business, its customers and the underlying invoices. Eligible invoices may receive an initial advance, with the remaining reserve—less agreed fees and adjustments—released after the customer pays. Advance rates, fees, reserves and eligibility rules vary by provider and transaction.
Recourse and Non-Recourse Structures
Recourse factoring generally requires the business to repurchase or replace invoices that remain unpaid under defined circumstances. Non-recourse treatment may shift limited credit risk to the factor, but it does not necessarily cover disputes, offsets, performance issues or every form of nonpayment. Contract language must be reviewed carefully.
Documents Commonly Requested
- Accounts-receivable aging reports
- Customer and invoice records
- Bank statements and financial statements
- Articles, ownership and tax information
- Contracts, purchase orders or proof of performance
- Existing lien and financing information
Factoring Versus a Business Line of Credit
A line of credit is generally underwritten primarily against the operating company. Factoring places greater emphasis on eligible invoices and customer credit quality. Businesses should compare control of collections, notification requirements, concentration limits, minimum fees, contract length and total financing cost.
Compare our business line of credit, working-capital financing and other commercial financing programs.