Receivables
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Invoice factoring
Turn completed work into cash without waiting out every payment cycle.
Invoice factoring can help a B2B business access cash tied up in outstanding invoices. Instead of waiting for an approved customer to pay on its normal schedule, the business may receive an advance against eligible receivables. The customer’s credit quality and the quality of the invoice often matter as much as the borrower’s own history.
Tower Business Capital guide · Educational overview
Advance + reserve
Structure
Balance settles after paymentCustomer credit
Review focus
Invoice quality and payment historyQuick answer
What should a business owner know first?
This option is built around eligible invoices and the customers expected to pay them, so the quality of receivables matters as much as the business’s own profile.
Plain-English guide
How invoice factoring works
A factor reviews invoices and the customers expected to pay them. If an invoice is eligible, the business may receive an advance, with the remaining balance settled after the customer pays, less the agreed fees. The exact process, notice to customers, advance rate, and responsibility for unpaid invoices vary by agreement.
When it fits
When this path can be useful
- B2B businesses with reliable invoices and longer customer payment terms
- Growth periods where payroll, materials, or vendor payments come before collections
- Businesses serving creditworthy commercial or government customers
- A temporary cash conversion need rather than a long-term operating loss
Lender perspective
What a lender is likely to review
- Accounts receivable aging and customer concentration
- Underlying invoices, purchase orders, contracts, and proof of delivery or service
- Customer credit quality, payment history, and any invoice disputes
- Liens, existing financing, and the company’s collections process
Before the conversation
How to come prepared
Complete documents do not guarantee an outcome, but they help make the conversation clearer and allow lenders to evaluate the request with better context.
- A current accounts receivable aging report that is reconciled to the books
- Copies of representative invoices and supporting contracts or purchase orders
- Proof that the goods were delivered or the service was completed
- A list of top customers, payment terms, and any known disputes or credits
A more informed decision
Questions to ask before you decide
- What advance rate applies, and when is the remaining reserve released?
- Is the arrangement recourse or non-recourse, and what does that mean here?
- Will customers be notified, and who handles collections?
- How are fees calculated if an invoice pays later than expected?
Keep in mind: Factoring works best when invoices are real, delivered, undisputed, and owed by customers with dependable payment histories. It is not a substitute for resolving collection or margin problems.
Next step
Start with the right questions. Then have the right conversation.
Every business has a different capital story. Talk with an independent advisor about the need in front of you and the path that makes sense for it.
Educational information only. Financing options, documentation, timing, pricing, and approval decisions vary by lender and borrower profile. Tower Business Capital is a commercial finance broker, not a direct lender.