Accounts receivable (AR) financing is a broad category of funding that uses your outstanding invoices as collateral or as an asset sale. It's one of the most accessible forms of business financing available because it's secured by money already owed to you.
Types of AR Financing
There are several ways to turn your receivables into cash:
- Invoice factoring - Selling individual invoices at a discount for immediate cash
- AR-based line of credit - Borrowing against your total receivables balance
- Invoice discounting - Similar to factoring but you retain collection responsibility
- Asset-based lending - A broader loan using receivables plus other assets as collateral
How Invoice Factoring Differs
Invoice factoring is the most common and accessible form of AR financing. Key differences:
- It's a sale of assets, not a loan - no debt created
- The factoring company handles collection from your customers
- Approval is based on customer credit, not your credit
- No repayment schedule - the invoice payment satisfies the transaction
- Available to startups and companies with poor credit
Want to explore AR financing?
Check your eligibility for invoice factoring.
Costs of AR Financing
Costs vary widely depending on the type:
- Invoice factoring: 1-5% per invoice (one-time fee per invoice)
- AR line of credit: 8-25% APR (ongoing interest on drawn balance)
- Invoice discounting: 1-3% per month (similar to factoring but with more control)
- Asset-based lending: 7-20% APR plus fees (most expensive but most flexible)
Qualification Comparison
One of the biggest advantages of factoring over other AR financing options is accessibility:
- Factoring: Minimal credit requirements, no time-in-business minimums
- AR line of credit: Good credit (650+), 1+ year in business, $500K+ revenue
- Asset-based lending: Strong financials, audited financial statements, $1M+ revenue
Which Is Right for You?
Choose factoring if you want speed, accessibility, and simplicity. Choose an AR line of credit if you have strong credit and want lower ongoing costs. Choose asset-based lending if you need large amounts and have the financials to support it.
Get Started
The fastest and most accessible AR financing option is invoice factoring. At Factoring Express, we can have you approved in days and funded the same day. Call 855-767-7771 or check your eligibility online.