Invoice Factoring for Startups and New Businesses

The reason factoring is available to a company three months old is that the underwriting question is not "will you survive?" but "will your customer pay this invoice?". If you invoice creditworthy businesses, you are factorable almost immediately.

What you still need

• Business-to-business invoices — consumer receivables are generally not factorable
• Delivered work, not deposits or future work
• Creditworthy customers — this is the actual underwriting
• A clean UCC position on your receivables
• Basic entity documentation and a business bank account

The specific risk for a startup

Customer concentration. Early-stage companies usually have very few customers, and factors apply concentration limits — a cap on how much of the facility any single customer can represent. If one client is 80% of your revenue, most of your ledger may be ineligible regardless of that client's credit quality. Ask about concentration limits before the application, not after.

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Compare against the alternatives

Factoring is fast and expensive. If you can access a revenue-based facility, a bank line or founder capital at a lower cost, do that first. Factoring earns its cost when growth is constrained specifically by the gap between doing the work and being paid for it.