What Is Accounts Receivable Financing?
Accounts receivable (AR) financing — also called invoice financing — is a type of short-term borrowing that allows businesses to use their outstanding invoices as collateral to access working capital before clients actually pay.
Unlike traditional loans, approval is based primarily on the creditworthiness of your clients, not your own credit score. This makes AR financing one of the most accessible funding options for B2B companies that struggle with slow-paying customers. As your business matures, building a strong business credit profile opens the door to larger AR facilities and better advance rates.
How It Works
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1
Submit Your Invoices
You provide outstanding invoices from creditworthy business clients to the financing company.
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2
Get Your Advance
Receive up to 90% of the invoice face value — typically within 24 to 48 hours of approval.
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3
Client Pays the Invoice
Your client pays the invoice directly (in standard AR financing) or to the lender (in factoring).
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4
Receive the Remainder
Once the invoice is settled, you receive the remaining balance minus a small fee (typically 1–5%).
Who Qualifies?
- B2B businesses with invoices from creditworthy clients
- At least 3 months in business
- Outstanding invoices of $10,000 or more
- Invoices due within 90 days
- No tax liens or prior bankruptcies (preferred)
AR Financing vs. Invoice Factoring
These two products are often confused. The key differences:
| Feature | AR Financing | Invoice Factoring |
|---|---|---|
| Who collects payment | You collect from client | Factoring company collects |
| Client notification | Usually confidential | Client is notified |
| Control over receivables | You retain control | Transferred to factor |
| Best for | Businesses wanting privacy | Businesses wanting full outsourcing |
Illustrative example terms shown for demonstration only. Not an offer or guarantee of financing.
Industries That Benefit Most
AR financing is especially powerful for: