# Invoice factoring cheat sheet: turn unpaid invoices into cash now

URL: https://cheapcheapwebsites.com/cheat-sheets/invoice-factoring/
Updated October 16, 2026. Funding offered by Merchant Fund Express (https://merchantfundexpress.com/invoice-factoring/); Cheap Cheap Websites builds websites and does not lend.

## The short answer
Invoice factoring turns unpaid invoices owed by business or government customers into cash now. A factor advances most of the invoice value, collects from your customer, then sends you the rest minus a fee. It fits businesses with real, undisputed invoices usually due in 30 to 90 days. It does not fit businesses paid at the point of sale by consumers.

## At a glance
- What it is: Cash advanced against unpaid business or government invoices
- Typical amounts: Based on invoice values; MFE reviews $5,000 to $5,000,000
- Invoice terms: Usually net 30 to 90
- Customers: Businesses or government agencies, not consumers
- Credit: Your customer's payment record matters a lot; scores from 500 considered
- Cost structure: A fee based on invoice value and how long the invoice stays unpaid
- Documents: Invoices, customer list, aging report, bank statements, ID
- Best for: B2B and government contractors waiting on slow payers
- Avoid if: You sell to consumers who pay at the register

## Before you apply: checklist
- List open invoices with customer name, amount and due date
- Confirm each invoice is for work completed and not disputed
- Pull an accounts receivable aging report
- Check whether any invoices are already pledged to another lender
- Ask how the fee is calculated and when it increases
- Ask whether the factor or you collect from the customer
- Ask what happens if a customer never pays
- Have bank statements and ID ready

## Factoring vs accounts receivable financing
Factoring usually means selling invoices. The factor advances a share of the invoice, often collects directly from your customer, then sends the remainder minus its fee once the customer pays. Accounts receivable financing usually means borrowing against your receivables as a group. You keep collecting from customers and repay as they pay. Terms vary, so ask which structure an offer uses. Ask too whether the arrangement is recourse (you buy back unpaid invoices) or non-recourse (the factor carries some credit risk). Our invoice factoring guide goes deeper.

## Construction factoring and progress billing
Construction is harder to factor than most industries. Progress billing, retainage and lien rights mean an invoice may not be paid in full even after work is done. Factors look for signed contracts, approved pay applications and a clear record of the general contractor or owner paying on time. Subcontractors paid by commercial general contractors are the usual fit. Note that many funders restrict residential remodeling and new residential construction. See the construction and contractor cheat sheet for more.

## Purchase-order and inventory funding
Purchase-order funding helps when you have a confirmed order from a business customer but not the cash to pay your supplier. The funder pays the supplier, the goods ship, you invoice the customer, and the invoice is often factored to close out the deal. Inventory funding helps distributors and ecommerce sellers stock up before a busy season. Because ecommerce customers are usually consumers paying at checkout, factoring rarely fits them; an advance or revenue-based option may fit better, so compare invoice factoring vs MCA .

## Illustrative example: one $100,000 invoice
Illustrative example Item Amount Invoice to a commercial customer, net 60 $100,000 Advance at 85% $85,000 Reserve held back ($100,000 minus $85,000) $15,000 Assumed fee: 3% per 30 days, paid on day 60 (2 x 3% x $100,000) $6,000 Rebate after customer pays ($15,000 minus $6,000) $9,000 Total received ($85,000 + $9,000) $94,000 Assumptions: an 85% advance, a fee of 3% per 30 days outstanding, the customer pays on day 60, no other fees. If the customer paid on day 30, the fee would be $3,000 and the rebate $12,000. These figures are illustrations, not offers. Real pricing and terms depend on your file. Common mistakes: Factoring invoices that are disputed or for work not yet finished. Ignoring how the fee grows the longer a customer takes to pay. Pledging the same invoices to two funders. Not telling your team how customer payments will be redirected.

## How Merchant Fund Express handles this
Merchant Fund Express reviews factoring for businesses that invoice business or government customers with real, undisputed invoices, usually net 30 to 90. It is not a fit for businesses paid at the point of sale by consumers. See the MFE invoice factoring page , gather your aging report, and apply with Merchant Fund Express . English and Spanish service is available.

## Frequently asked questions
**Who qualifies for invoice factoring?** Businesses that invoice other businesses or government agencies for completed work, with invoices usually due in 30 to 90 days. Your customers' payment history matters a lot. Businesses paid by consumers at the point of sale are not a fit.

**Will my customers know I am factoring?** Often yes, because many factors collect directly and the invoice shows new payment instructions. Some receivables financing lets you keep collecting yourself. Ask which structure an offer uses before you sign.

**Can government contractors use factoring?** Yes. Government agencies are often reliable payers but can be slow. Factoring advances most of the invoice value while you wait. Expect to provide the contract and approved invoices.

**What is purchase-order funding?** It pays your supplier so you can fill a confirmed business order you could not otherwise afford. After delivery, you invoice the customer and the invoice often gets factored to repay the purchase-order funding.

Apply with Merchant Fund Express: https://merchantfundexpress.com/current-application.html?utm_source=cheat-sheet&utm_campaign=invoice-factoring