What is invoice financing?

Invoice financing (accounts receivable financing) allows businesses to access cash tied up in outstanding invoices before customers pay them. In invoice factoring, you sell your invoices to a factoring company at a discount (typically 1%–5% of invoice value) in exchange for immediate cash — the factor then collects from your customers. In invoice discounting, you borrow against your invoices but retain responsibility for collection. This type of financing is ideal for B2B businesses with long payment cycles (net 30–90) that need cash flow before clients pay. Approval is based on the creditworthiness of your customers, not your own business credit.