Receivables Financing

Most programs advance a percentage of each invoice up front and release the rest, less the fee, once your customer pays. Both numbers depend on who your customers are and how old the invoices run, so they are quoted per business rather than published. Ask for the total cost over the expected payment period — that is the figure that makes two offers comparable, and a monthly percentage is not.

Because the invoices are what is being financed, your customers' payment record counts for more than your own credit score. Funders generally want business-to-business or government invoices for work already delivered, to customers who pay reliably, that are not already pledged elsewhere. Businesses that invoice consumers, or bill before delivering, are usually a poor fit.

Under recourse terms you stay responsible if a customer never pays. Non-recourse moves a defined part of that risk to the funder and costs more for doing so. It rarely covers every reason an invoice goes unpaid, so check which specific events are named before treating it as protection.

It depends on the structure. Notification arrangements tell your customer to pay the funder directly. Non-notification arrangements leave the payment instructions unchanged and keep the relationship with you. Confidentiality is worth raising early, because it narrows which funders fit.

Treatment turns on whether the arrangement transfers the risks of ownership of the invoice or advances money against it, which is the same question that separates factoring from receivables financing. It changes how the balance sheet reads and can affect covenants on other borrowing, so it is one to put to your accountant with the term sheet in hand rather than after signing.

Setting up a facility takes longer than a term loan because the funder reviews your customers as well as your business. Once it is running, drawing against a new invoice is fast and can settle in as little as 24 hours.