Accounts Receivable Financing
A/R Financing — Turn Invoices Into Immediate Cash
Turn outstanding B2B invoices into working capital within 24–48 hours at 70–95% advance rates — without selling your receivables.
Process
How A/R Financing Works
Four steps to convert unpaid invoices into working capital.
Step 1
Invoice Your Customers
Complete work or deliver goods and issue invoices to your B2B customers on your normal payment terms.
Step 2
Submit Invoices for Financing
Provide eligible invoices to the lender. They verify each invoice against customer credit quality and confirm the receivable is current and undisputed.
Step 3
Receive Your Advance
Get 70–95% of eligible invoice value within 24–48 hours — working capital without waiting 30–90 days for customers to pay.
Step 4
Settlement & Replenishment
When customers pay, the balance (minus fees) is released and your borrowing base replenishes automatically for new invoices.
Compare
A/R Financing vs. Other Options
How accounts receivable financing compares to invoice factoring, lines of credit, and MCAs.
| Feature | A/R Financing | Invoice Factoring | Line of Credit | MCA |
|---|---|---|---|---|
| Funding Speed | 24–48 hours | 24–48 hours | 1–2 weeks | Same day |
| Advance Rate | 70–95% | 70–85% | 70–80% | N/A |
| Typical Cost (APR) | 15–35% | 20–60% | 8–20% | 40–150%+ |
| Qualification | Moderate | Easy | Strict | Easy |
| Customer Notification | Usually not | Usually yes | No | No |
| You Collect Payment | Yes | No — factor collects | Yes | Auto-debit |
| Scales With Revenue | Yes | Yes | Partially | No |
| Balance Sheet Impact | Liability (loan) | Off-sheet (asset sale) | Recorded as debt | Recorded as debt |
| Collateral | Receivables | Receivables sold | Receivables + blanket | None |
| Best For | B2B slow payers | Fast cash, weak credit | Established businesses | No invoices |
Structures
Types of A/R Financing
Three structural variants — differing in scope, commitment, and who bears the credit risk.
Invoice factoring is not a type of A/R financing. Factoring is a sale of receivables — you transfer ownership to a factor who collects directly from your customers. A/R financing is a loan secured by receivables — you retain ownership and collect payments yourself. Different legal structure, different accounting treatment, different customer relationship implications. See Invoice Factoring →
Key Decision
Recourse vs. Non-Recourse
The most important structural choice in A/R financing: who bears the risk if a customer can't pay?
Important: Non-recourse protection typically covers customer insolvency only — if a customer disputes an invoice or refuses payment for other reasons, you may still bear that risk. Always confirm the exact scope of non-recourse coverage in the facility agreement before signing.
Pros & Cons
Benefits & Considerations
Understanding both sides helps you decide if A/R financing is the right move.
Benefits
- Accelerates cash flow without taking on traditional term debt
- Borrowing capacity grows automatically as your revenue grows
- Qualification driven by customer credit quality, not just your own
- Flexible — finance all invoices or only the ones you choose
- Non-recourse options provide built-in credit risk protection
- Can be used alongside other facilities (term loans, lines of credit)
Considerations
- More expensive than traditional bank financing or SBA loans
- Not all receivables qualify — age, disputes, and customer type matter
- Concentration limits cap borrowing if one customer dominates your A/R
- Full facilities may require minimum monthly volume commitments
- Some lenders require blanket UCC-1 liens on business assets
- Dependence risk if cash flow management becomes reliant on the facility
See how much working capital your invoices can unlock — get a free, no-obligation quote.
Example
Real-World Example
Staffing company · $100K/month in invoices · 45-day payment terms
Without A/R Financing
- • Wait 45 days for $100K payment
- • Weekly payroll creates cash strain
- • Limited ability to take on new clients
- • Risk of vendor payment delays
With A/R Financing
- • $85K advance within 24 hours
- • Payroll met without stress
- • Capacity to onboard 40% more clients
- • Vendor relationships stay intact
Net cost: $1,500/month using a recourse A/R line of credit (vs. $2,500 with factoring at 2.5%). Improved cash flow enables 40% more client capacity — generating ~$8,800 additional gross profit vs. ~$600 added financing cost on the new volume. Net monthly benefit: ~$8,200.
Qualification
What Lenders Look For
A/R financing underwriting focuses on your receivables quality and customer credit — not just your own credit score.
Invoice Eligibility
Invoices must represent fully delivered goods or completed services. They must be current (typically under 90 days), undisputed, and issued to creditworthy B2B or government customers. Consumer invoices, intercompany receivables, and milestone-based billings for work in progress are typically ineligible.
Customer Credit Quality
Since receivables are the collateral, lenders evaluate your customers — not just you. A business with average credit but Fortune 500 clients can often access more capital than one with great credit and shaky customers. Lenders may run D&B or commercial credit reports on your top customers.
Concentration Limits
Most lenders cap single-customer exposure at 20–25% of eligible A/R. If one client represents 50% of your receivables, the excess above the concentration limit is excluded from your borrowing base. This protects lenders against one customer bankruptcy wiping out their collateral.
Dilution Rate
Dilution measures how much your A/R shrinks due to credits, returns, discounts, and write-offs. A high historical dilution rate (above 10–15%) signals that not all invoices will be collected in full, which lenders account for with lower advance rates or stricter eligibility criteria.
Industries
Industry Applications
A/R financing solves specific cash flow challenges across B2B industries.
Staffing & Temp Services
Bridge weekly payroll obligations against 30–45 day client payment terms without credit strain.
See Invoice Factoring →Manufacturing
Convert finished-goods invoices to working capital for raw materials and steady production runs.
See Equipment Financing →Distribution & Wholesale
Manage the gap between supplier payments and customer collections to maintain optimal inventory.
See PO Financing →Professional Services
Stabilize cash flow between project milestones and invest in talent without waiting for client payments.
See Line of Credit →FAQ
Frequently Asked Questions
Everything you need to know about accounts receivable financing.
Ready to Convert Invoices to Cash?
Get a personalized A/R financing quote and see how much working capital you can unlock today.