Get paid now on invoices due later
Accounts receivable financing
Turn unpaid invoices into working capital. Accounts receivable financing uses what your customers owe you as collateral, so approval leans on their payment history, not just your credit score.
What is accounts receivable financing?
Accounts receivable (A/R) financing, also called invoice financing or asset-based lending, uses money your customers owe you as collateral.
Instead of leaning mainly on your credit score, lenders look at your unpaid invoices and how reliably your customers pay. You get working capital now, keep your liquidity, and repay as your customers pay you. Where it fits, it can be set up as a revolving line that grows with your receivables.
A/R financing is different from factoring, where you sell the invoices. Compare the two in invoice factoring vs. A/R financing.
Program highlights
- Your customers' creditworthiness drives approval; your credit score is not a major factor
- Unlocks cash tied up in outstanding invoices
- Can be used as a line of credit where applicable
- Works with invoice terms of net 30 to 120 days
- Financing from $10,000 to $10,000,000
- Can shift existing fixed debt into a revolving facility that improves cash flow
How accounts receivable financing works
01
Share your receivables
You provide an accounts receivable aging report showing who owes you, how much, and how long invoices have been outstanding.
02
Your borrowing base is set
The lender advances a percentage of eligible invoices. Very old invoices and some customer types may be excluded.
03
Draw what you need
Use the funds for payroll, suppliers, or growth. You keep invoicing and collecting from your customers as usual.
04
Repay as customers pay
As invoices are paid, the balance goes down and availability goes back up for new invoices.
A/R financing vs. invoice factoring
| A/R financing | Invoice factoring | |
|---|---|---|
| Structure | You borrow against your receivables | You sell invoices at a discount |
| Collections | You keep collecting from your customers | The factor often collects directly |
| Customer visibility | Usually invisible to customers | Customers may be told to pay the factor |
| Best for | Established businesses keeping client relationships in-house | Newer businesses with strong customers |
Which businesses benefit most?
A/R financing is a proven strategy for businesses experiencing high growth, carrying heavy payroll or supplier payments, or running stable operations that need cash flow elsewhere. Staffing agencies, manufacturers, distributors, logistics companies, and B2B service firms that invoice on terms are common users.
If your revenue runs through card sales or daily deposits instead of invoices, compare revenue based financing or working capital instead.
Requirements and documents
Minimum qualifications
- No minimum FICO score required
- 2+ years in business
- Stable or growing business income
- Creditworthy customers who pay on terms
What you'll need to apply
- A business debt schedule
- 2 years of business tax returns
- An accounts receivable aging report
- Interim year-to-date financials: profit and loss statement and balance sheet
What affects the cost
- Your customers' credit and payment history
- How long invoices stay unpaid; faster-paying customers mean lower cost
- Invoice volume and concentration in a few customers
- Your business financials, time in business, and existing debt
Always compare offers in total dollars, including any facility or servicing fees.
Related guides
Frequently asked questions
Q01What businesses benefit most from accounts receivable financing?
Businesses experiencing high growth, with heavy payroll or supplier payments, or with stable operations that need cash flow elsewhere, especially B2B companies that invoice customers on 30 to 120 day terms.
Q02What's the most important qualification for this type of loan?
That your clients and customers are creditworthy. Strong customers who pay reliably lead to higher approvals and better terms.
Q03Why should I keep my cash?
Keeping cash lets you reinvest, expand, or buy equipment instead of waiting on unpaid invoices or taking on more fixed monthly payments.
Q04Is accounts receivable financing the same as factoring?
No. With A/R financing you borrow against your invoices and keep collecting from customers. With factoring you sell the invoices, and the factor often collects directly.
Q05Will my customers know I'm using A/R financing?
Usually not. Collections typically stay with you, so customers keep paying you as normal.
Q06Does my credit score matter?
Our A/R program has no minimum FICO score. Approval leans on your customers' credit and payment history, plus your time in business and financials.
Sources and further reading
- UCC 9-109: Scope (includes sales of accounts), Legal Information Institute, Cornell Law School
- Uniform Commercial Code Article 9: Secured Transactions, Legal Information Institute, Cornell Law School
- Manage your finances, U.S. Small Business Administration
Financial disclaimer: This page is for general information and is not financial, legal, or tax advice. SmallByzLoans is a funding marketplace, not a lender. Approval, amounts, rates, and terms are set by each funding provider and are subject to underwriting.
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