Question 1

What's the difference between recourse and non-recourse factoring?

Accepted Answer

With recourse factoring, if your customer does not pay, you must buy back the invoice. With non-recourse factoring, the factor absorbs the loss if the customer declares bankruptcy — but not for other non-payment reasons such as disputes. Non-recourse is typically 0.5–1.5% more per month. Most small business factoring is recourse.

Question 2

How is factoring different from an MCA or a line of credit?

Accepted Answer

Factoring is the sale of a specific receivable — not a loan. You do not take on debt; you advance cash you are already owed. An MCA is a purchase of future revenue with daily or weekly payments from your bank account. A line of credit is a revolving loan you draw and repay. Factoring is the right tool when you have creditworthy B2B invoices with 30–90 day payment terms.

Question 3

Are factoring fees tax-deductible?

Accepted Answer

Yes. Factoring fees are treated as a business expense and are deductible. The interest-equivalent portion of the fee is deductible under Section 163; the non-interest fees are deductible as ordinary business expenses. Consult your CPA for the specific treatment in your situation.

Question 4

What happens if my customer pays late?

Accepted Answer

Most factors charge additional fees for invoices outstanding beyond the expected term — typically 30, 60, or 90 days. Tiered-rate structures make this most visible — your rate steps up automatically. Some factors have a maximum factoring period, after which you must buy back the invoice under recourse arrangements.

Question 5

Will my customers know I'm factoring?

Accepted Answer

In notification factoring (standard), your customer is told to remit payment directly to the factor. In non-notification factoring, available from some factors at a premium, customers pay you and you forward funds. Most B2B customers understand factoring and it carries no stigma — it is common in trucking, staffing, and manufacturing.

Industry	Advance Rate	Rate / Month	Approx. APR	Notes
Staffing & Temp Agencies	90–95%	0.5–1.5%	6–20%	Short pay cycles, creditworthy clients — best rates in factoring
Transportation / Trucking	90–95%	1–2%	12–28%	Freight factoring is a specialized, competitive market
Manufacturing	80–90%	1–2.5%	12–35%	Varies by customer concentration and average invoice size
Wholesale / Distribution	80–90%	1–2.5%	12–35%	Creditworthy retail customers improve rates significantly
Construction (subcontractors)	70–85%	1.5–3.5%	20–50%	Higher risk due to lien waivers, retainage, and dispute risk
Healthcare / Medical	70–80%	1.5–3%	18–45%	Insurance reimbursement timelines and writedown risk affect pricing
Government Contractors	85–92%	0.75–2%	9–28%	Slow-paying but near-zero default risk — favorable rates
Technology / IT Services	75–85%	1–2.5%	12–35%	Project milestone billing and dispute risk impact pricing

Product	Typical APR	Time to Funds	Best Use
Invoice Factoring	12–45%	1–3 days	Outstanding B2B invoices, cash flow gaps
AR Line of Credit	8–25%	1–3 weeks	Revolving cash flow with receivables as collateral
Business Line of Credit	8–30%	1–4 weeks	Ongoing working capital, seasonal needs
Term Loan	7–30%	2–4 weeks	One-time investments, equipment, expansion
Merchant Cash Advance	40–150%	1–2 days	Retail/restaurant emergency cash; high cost
SBA Loan	5–11%	30–90 days	Long-term growth with best rates; slowest process

Factoring Rates Guide

Typical Rates by Industry

Invoice Cost Calculator

Common Fee Structures

Flat Rate

Tiered Rate

Prime Plus

Flat Fee + Daily Interest

5 Ways to Lower Your Factoring Rate

How Factoring Compares to Other Financing

Frequently Asked Questions

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