Cash flow is one of the most common challenges businesses face, especially when customers take 30, 60, or even 90 days to pay invoices. Invoice factoring is a financing solution designed to bridge that gap by turning unpaid invoices into immediate working capital. Below, we break down how invoice factoring works, who it’s for, and why many businesses rely on it to maintain steady operations.

What Is Invoice Factoring?

Invoice factoring is a type of accounts receivable financing where a business sells its unpaid invoices to a factoring company in exchange for fast cash. Instead of waiting weeks or months for customer payment, the business receives most of the invoice value upfront.

Invoice factoring may also be referred to as Accounts Receivable Finance, Factoring Freight, Oil and Gas Financing, Business Financing, Payroll Funding, or Small Business Funding.

This solution is commonly used by industries with long payment cycles, such as trucking, transportation, manufacturing, staffing, oil and gas, and distribution.

How Invoice Factoring Works Step by Step

1. Check your customer’s creditworthiness

Review to confirm the customer’s creditworthiness. Approval is typically based on the customer’s ability to pay, not your business’s credit score. A good factoring company will have tools to best assist in the decision making.

2. You submit the invoice to a factoring company

After delivering goods or completing a service you submit the invoice to a factoring company. The best factoring companies will handle all the invoicing, billing, and collections to your customer. Most factoring companies may already have established relationships with your customers.

3. You receive an advance

Once approved, the factoring company advances a large percentage of the invoice value—often 80% to 99%—meaning you will receive pay in 24 hours or same day pay.

4. Your customer pays the invoice

Your customer submits payment directly to the factoring company according to the original payment terms.

5. You receive the remaining balance

After the invoice is paid, the factoring company releases the remaining balance to you, minus the factoring fee.

What Are Invoice Factoring Fees?

Invoice factoring fees, also referred to as factoring rates, vary based on factors such as:

-Invoice amount

-Payment terms

-Industry risk

-Customer credit profile

-Monthly volume

Fees are typically structured as a small percentage of the invoice value and should be transparent compared to traditional loan interest.

Who Should Use Invoice Factoring?

Invoice factoring is a strong fit for businesses that:

Invoice other businesses (B2B)

Experience slow-paying customers

Are growing quickly and need working capital

Want financing without taking on debt

Prefer approval based on customer credit rather than business credit

Startups, owner-operators, fleets, freight brokers, staffing and payroll services, oil and gas sectors, distribution and manufacturing industries, and companies alike often use factoring as a flexible cash flow solution.

Invoice Factoring vs. Traditional Business Loans

Unlike bank loans, invoice factoring does not add debt to your balance sheet. There are no long approval processes, fixed monthly payments, or strict credit requirements. Funding grows naturally as your business invoices more, making it a scalable option for growing companies.

Common Questions About Invoice Factoring

Is invoice factoring a loan?

No. Invoice factoring is the sale of an asset (your invoice), not a loan.

How fast can I get funded?

Many businesses receive pay within 24 hours or same day pay, of invoice approval.

Do customers know about factoring?

In most cases, yes. Payments are redirected to the factoring company, but the process is professional and standard across many industries. A good factoring company may already have established relations with your customers, and if not they will work with them as a partner to build a long term relationship with them.

How Single Point Capital Helps Businesses with Invoice Factoring

Single Point Capital provides invoice factoring solutions designed to support businesses at every stage of growth. With a focus on transparency, industry expertise, and personalized service, Single Point Capital helps businesses turn unpaid invoices into reliable cash flow.

What set Single Point Capital apart is:

-Competitive Rates: We work with you to customize a rate that best fits your business and stays completive.

-Transparent fees: We are 100% transparent with our fees, no hidden increased rates or fees ever.

-Personalized services: Every client we partner with will work with a dedicated, Spanish and English speaking, account rep.

-More than just a factor: We partner with business owners as their platform for expansion.

Beyond factoring, Single Point Capital also offers operational and back office support, funding solutions, collections and billing services, fuel card, fuel discounts, and premium financing options with our insurance down payment assistance and more allowing business owners to focus on growth while maintaining financial stability.

Located in Houston, Texas servicing companies through Texas and nationwide, our teams experience across multiple industries makes Single Point Capital a trusted partner for companies looking for flexible, practical financing options.