Funding comparison
Short answer
Choose an invoice factoring for b2B businesses waiting 30–90 days for customer payments; choose a revenue-based financing for businesses with consistent revenue seeking performance-linked payments. Compare eligibility and timing directly with each provider, then compare net proceeds, total payback and payment size on the written offers.
Both products turn future receipts into cash today, but they look at different receipts. Invoice factoring advances against specific unpaid B2B invoices and is repaid when the customer pays. Revenue-based financing advances against projected sales and is repaid as a fixed percentage of every month's revenue until a cap is reached. A staffing firm and an e-commerce brand might both need $40,000; which product fits depends entirely on where the revenue comes from.
The short version
Invoice factoring converts eligible B2B receivables into working cash, with underwriting focused heavily on invoice quality and customer credit.
The short version
Revenue-based financing links repayment to business receipts, so payments can move with performance instead of following a fixed amortization schedule.
How they differ
Invoice factoring is a sale of receivables. The factor advances 70% to 90% of an eligible invoice within one to three business days, collects from the customer on the normal 30-to-90-day terms, then remits the balance minus a fee of roughly 1% to 5% per 30 days. Underwriting focuses on the customer's creditworthiness and the invoice's validity, which is why factoring works for young businesses and owners with weak credit. The business's own credit is secondary.
Revenue-based financing is an advance against future sales, repaid by remitting a fixed share of monthly revenue (typically 3% to 10%) until the business has paid back a set multiple of the advance, commonly 1.1x to 1.5x. Payments rise in strong months and fall in slow ones. It suits e-commerce, subscription and seasonal businesses with $15,000 or more in predictable monthly revenue, and providers often connect directly to sales platforms and bank accounts to underwrite and collect.
The dividing line is the customer. Factoring requires business or government customers who receive invoices and pay on terms. Revenue-based financing works for businesses that sell to consumers, get paid immediately, and have no invoices to factor. A company that has both kinds of revenue can use both, but most businesses are clearly on one side of the line.
Side by side
Product structures differ by provider. Confirm current terms directly; the numerical payment scenarios below are hypothetical and are not market quotes.
| Consideration | Invoice factoring | Revenue-based financing |
|---|---|---|
| Amount to discuss | Provider-specific; size to repayment capacity | Provider-specific; size to repayment capacity |
| Term | Customer payment dates and contract fee periods apply | Check repayment cap, revenue share and any minimum payments |
| Time to fund | Provider-dependent; confirm availability of funds | Provider-dependent; confirm availability of funds |
| Pricing structure | Contracted invoice fee, fee period, reserve and any additional charges | Contracted repayment cap and fees; check revenue reconciliation terms |
| Payment rhythm | Settled when the customer pays the invoice | Revenue-linked remittances under the agreement |
| Time in business | Provider assesses business and eligible invoices | Operating-history requirements vary by provider |
| Revenue guideline | Eligible invoices and customer review required | Document recurring revenue and repayment capacity |
| Credit guideline | Customer and owner checks depend on the agreement | Ask which personal and business credit checks apply |
| Typical documents | Accounts-receivable aging report; Sample invoices and contracts; Customer list; Government ID and entity documents | 6–12 months of bank statements; Revenue or sales dashboard access; Government ID |
| Best for | B2B businesses waiting 30 – 90 days on invoices: trucking, staffing, construction subcontractors, wholesale | E-commerce, subscription and seasonal businesses that want payments to flex with sales |
| Watch-outs | Confirm customer notification and payment instructions; Recourse terms determine responsibility for unpaid invoices; Check fee periods, minimum charges and slow-payment costs | Fast growth means faster, costlier repayment; Caps are fixed regardless of how quickly you repay; Some providers require read-only access to sales platforms |
The table shows two products that are fast, credit-flexible and revenue-driven, and yet mechanically different. Factoring's cost is quoted per invoice per 30 days and scales with how slowly customers pay; there is no fixed term. Revenue-based financing's cost is a fixed cap, so paying faster does not reduce it, and its effective annual cost rises if the business grows quickly and repays early. Factoring's watch-outs are about customers (notification, recourse, slow payers); revenue-based financing's are about growth and platform access.
Worked example
Each table estimates $40,000 using three hypothetical scenario inputs. The payment estimator below lets you change the amount or product.
| Scenario | Estimated payment | Total payback / customer settlement | Cost of capital | Basis |
|---|---|---|---|---|
| Lower scenario input | $600 / invoice (fee) | $40,000 customer settlement; $39,400 net to business | $600 | 1.0% per 30 days; 45 days; 80% advance |
| Midpoint | $1,800 / invoice (fee) | $40,000 customer settlement; $38,200 net to business | $1,800 | 3.0% per 30 days; 45 days; 80% advance |
| Higher scenario input | $3,000 / invoice (fee) | $40,000 customer settlement; $37,000 net to business | $3,000 | 5.0% per 30 days; 45 days; 80% advance |
| Scenario | Estimated payment | Total payback / customer settlement | Cost of capital | Basis |
|---|---|---|---|---|
| Lower scenario input | $3,667 / month (assumed average) | $44,000 | $4,000 | 1.10x; assumed 12 months; actual payments vary with revenue |
| Midpoint | $4,333 / month (assumed average) | $52,000 | $12,000 | 1.30x; assumed 12 months; actual payments vary with revenue |
| Higher scenario input | $5,000 / month (assumed average) | $60,000 | $20,000 | 1.50x; assumed 12 months; actual payments vary with revenue |
Suppose a business needs $40,000. Factoring $40,000 of invoices that customers pay in an average of 45 days, at the midpoint of the published fee range (about 3% per 30 days), costs roughly $1,800 in fees; the business receives most of the $40,000 within days and the remainder, minus fees, when customers pay. If customers pay in 30 days the fee falls; if they stretch to 90, it roughly doubles.
The same $40,000 as revenue-based financing at the midpoint cap of 1.3x means repaying $52,000, or about $12,000 in cost, collected as a percentage of sales over roughly twelve months. The monthly figure in the table is an average; a strong month remits more and finishes the cap sooner. Factoring is far cheaper per dollar here because the money is outstanding for weeks, not a year, but it only works if the business has $40,000 of eligible invoices. Revenue-based financing does not need invoices at all.
At the midpoints: invoice factoring costs about $32,000 advanced against the invoice, $1,800 in fees and $6,200 in remaining reserve at collection (a negative reserve is an additional shortfall). The customer settles the invoice; this is not a borrower loan repayment, and revenue-based financing costs about $4,333 per month (assumed average) and $52,000 in total payback (1.30x; assumed 12 months; actual payments vary with revenue). Every figure is an estimate using hypothetical assumptions, not a quote.
Payment estimator
Illustrative revenue-based financing figures for $40,000 using hypothetical rate assumptions. Switch the product to invoice factoring to compare. Your offer depends on underwriting.
$4,333 per month (assumed average) and $52,000 in total payback (1.30x; assumed 12 months; actual payments vary with revenue).
Hypothetical figures using the stated term or collection period. Fees are excluded. Revenue-based amounts are averages over an assumed period, not fixed payments.
| Scenario | Estimated payment | Total payback / customer settlement | Basis |
|---|---|---|---|
| Lower scenario input | $3,667 / month (assumed average) | $44,000 | 1.10x; assumed 12 months; actual payments vary with revenue |
| Midpoint | $4,333 / month (assumed average) | $52,000 | 1.30x; assumed 12 months; actual payments vary with revenue |
| Higher scenario input | $5,000 / month (assumed average) | $60,000 | 1.50x; assumed 12 months; actual payments vary with revenue |
Decision guide
Choose invoice factoring if your revenue arrives as B2B invoices on terms; it is the cheaper and more scalable tool for that pattern. Choose revenue-based financing if you are paid at the point of sale and want a lump sum with payments that flex with revenue. If you invoice some customers and sell directly to others, factor the invoices and use revenue-based financing only for the portion the invoices cannot cover.
Start a no-obligation reviewIndustry fit
Weekly payroll or fuel against net-30 to net-60 invoices is the defining factoring use case. Freight factoring in particular is a standard tool for carriers waiting on brokers.
Inventory bought in August for fourth-quarter sales, paid back as a share of holiday revenue, is the textbook revenue-based structure. Platform-connected underwriting makes it fast.
Recurring revenue is easy to underwrite for revenue-based financing, and there are usually no invoices large enough to factor. Providers may ask for read-only access to billing systems.
Businesses that both invoice retailers and sell online can use both products, factoring the retail invoices and applying revenue-based financing against online sales.
Qualification
Factoring underwriting starts with an accounts-receivable aging report, sample invoices and contracts, and a customer list. The factor checks the customers' credit and payment history and verifies that invoices are for completed work with no disputes. There is often no minimum time in business, and owner credit scores from 500 are considered. Concentration matters: a single customer making up most of the receivables can limit the advance.
Revenue-based financing underwriting runs on six to twelve months of bank statements and, frequently, direct access to sales dashboards or payment processors. Published guidelines are six to twelve months in business, $15,000 or more in monthly recurring or predictable revenue, and a credit score around 550 or higher, though revenue matters more than score. Providers look for consistency and a low rate of chargebacks or refunds.
Using both
Businesses with mixed revenue can hold both. Factor the B2B invoices as they are issued, and use a revenue-based advance for the portion of the need that invoices cannot cover, such as an inventory buy before the invoices exist. Disclose each to the other provider; both will look at bank statements and see the remittances.
Watch the combined take. A factoring facility that holds back a reserve and a revenue-based provider remitting 8% of sales together can consume a large share of gross cash flow. Model a slow month before layering the two.
Watch-outs
Factors verify invoices with customers. Disputed or pre-billed invoices are rejected and can end the relationship.
Recourse factoring returns unpaid invoices to you after a set period. Non-recourse costs more but shifts the customer's default risk to the factor.
The cap is fixed. Repaying in six months instead of twelve doubles the effective annual cost; plan for that before accepting.
Two providers each taking a percentage of sales quickly becomes unaffordable. Underwriters treat stacked advances as a red flag.
Next step
Now Biz Fund reviews the request, identifies which of these products the file realistically fits, and starts without a hard credit pull. There is no obligation, and no product is guaranteed.
Common questions
Factoring is usually cheaper per dollar because the money is outstanding for weeks. Published fees are 1% to 5% per 30 days; on a 45-day invoice cycle that is roughly 1.5% to 7.5% of the invoice. Revenue-based caps of 1.1x to 1.5x mean 10% to 50% of the advance in fixed cost regardless of speed.
No. Factoring requires invoices to business or government customers on payment terms. Consumer or point-of-sale businesses look at revenue-based financing, working capital loans or cash advances instead.
In notification factoring, yes; they are instructed to pay the factor. Non-notification factoring keeps the arrangement private but costs more and is offered to stronger files.
Factoring funds in one to three business days after the facility is set up, then within a day or two per invoice. Revenue-based financing publishes two to seven business days, faster when sales platforms connect directly.
Factoring often has no minimum time in business because the customers' credit carries the file. Revenue-based financing typically wants six to twelve months of consistent revenue.
Under recourse factoring, the invoice is charged back to you after a set period, usually 60 to 90 days. Under non-recourse factoring, the factor absorbs the loss if the customer is insolvent, though not for disputes.
Many providers require one, and some require read-only access to bank and sales accounts. Read the agreement's remedies section before signing.
Repaying early finishes the obligation sooner but does not reduce the fixed cap unless the contract includes a prepayment discount. Ask for one before signing.
Factoring scales with invoice volume: more sales to creditworthy customers means more advance capacity. Revenue-based financing is a fixed advance, though providers often offer renewals once a portion has been repaid.
Now Biz Fund is a team of small-business funding specialists, not a lender. Payment calculations use hypothetical amounts, rates and schedules; they are not current market quotes or offers. Confirm pricing, eligibility, fees and availability of funds directly with the provider before committing.