Funding comparison
Short answer
Choose a line of credit for a reusable cushion for recurring or unpredictable expenses; choose an invoice factoring for b2B businesses waiting 30–90 days for customer payments. Compare eligibility and timing directly with each provider, then compare net proceeds, total payback and payment size on the written offers.
A line of credit and invoice factoring are the two most common tools for the same problem: cash going out before customer payments come in. The line borrows against the business's overall creditworthiness; factoring borrows against specific invoices. Which one fits depends on whether the business's customers are strong enough to carry the underwriting, and whether the owner's own file is strong enough to carry a line.
The short version
A business line of credit provides repeat access to capital for cash-flow gaps and opportunities without a new application for every draw.
The short version
Invoice factoring converts eligible B2B receivables into working cash, with underwriting focused heavily on invoice quality and customer credit.
How they differ
A business line of credit is a revolving limit, typically $10,000 to $250,000, that the business draws on and repays as needed. Interest accrues only on the outstanding balance, at published APRs of roughly 10% to 60% or a weekly fee on the drawn amount. The lender underwrites the business: six to twelve months of history, roughly $10,000 or more in monthly revenue and credit around 600 are the usual guidelines. The line is general purpose; the lender does not care whether the draw covers payroll, inventory or a tax bill.
Invoice factoring advances 70% to 90% of eligible B2B invoices within a day or two and settles when the customer pays, charging about 1% to 5% per 30 days. The factor underwrites the customers rather than the business, so a two-month-old staffing agency with a Fortune 500 client can qualify while the owner's credit is secondary. Capacity grows automatically with invoice volume, but the facility is restricted to receivables and, in notification factoring, customers pay the factor directly.
The practical difference is who the lender trusts. A line requires the business itself to be creditworthy; factoring requires its customers to be. A business with both can pick on cost and convenience; a business with only one has its answer.
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 | Business line of credit | Invoice factoring |
|---|---|---|
| Amount to discuss | Provider-specific; size to repayment capacity | Provider-specific; size to repayment capacity |
| Term | Draw repayment and renewal terms vary by provider | Customer payment dates and contract fee periods apply |
| Time to fund | Provider-dependent; confirm availability of funds | Provider-dependent; confirm availability of funds |
| Pricing structure | Interest or installment fees by provider; check draw and maintenance charges | Contracted invoice fee, fee period, reserve and any additional charges |
| Payment rhythm | Interest or installment payments under the draw agreement | Settled when the customer pays the invoice |
| Time in business | Operating-history requirements vary by provider | Provider assesses business and eligible invoices |
| Revenue guideline | Document recurring revenue and repayment capacity | Eligible invoices and customer review required |
| Credit guideline | Ask which personal and business credit checks apply | Customer and owner checks depend on the agreement |
| Typical documents | 3–6 months of bank statements; Government ID; Business tax ID | Accounts-receivable aging report; Sample invoices and contracts; Customer list; Government ID and entity documents |
| Best for | Recurring or unpredictable needs: payroll gaps, inventory restocks, seasonal dips | B2B businesses waiting 30 – 90 days on invoices: trucking, staffing, construction subcontractors, wholesale |
| Watch-outs | Unused lines can be reduced or closed by the lender; Draw fees and maintenance fees add up; Rates are often variable | Confirm customer notification and payment instructions; Recourse terms determine responsibility for unpaid invoices; Check fee periods, minimum charges and slow-payment costs |
The table shows the line as the more flexible, more owner-dependent product and factoring as the more specialized, more customer-dependent one. The line's published range tops out at $250,000; factoring scales to millions because the limit is invoice volume. The line's cost is quoted as an APR on the drawn balance, factoring's as a fee per invoice per 30 days, and both are often cheaper than they look on paper when the money is outstanding for only a few weeks. Factoring carries the customer-facing watch-outs; the line carries the fee and reduction watch-outs.
Worked example
Each table estimates $30,000 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 | $2,637 / month | $31,650 | $1,650 | 10.0% assumed annual interest; 12 months; fees excluded |
| Midpoint | $2,999 / month | $35,987 | $5,987 | 35.0% assumed annual interest; 12 months; fees excluded |
| Higher scenario input | $3,385 / month | $40,617 | $10,617 | 60.0% assumed annual interest; 12 months; fees excluded |
| Scenario | Estimated payment | Total payback / customer settlement | Cost of capital | Basis |
|---|---|---|---|---|
| Lower scenario input | $450 / invoice (fee) | $30,000 customer settlement; $29,550 net to business | $450 | 1.0% per 30 days; 45 days; 80% advance |
| Midpoint | $1,350 / invoice (fee) | $30,000 customer settlement; $28,650 net to business | $1,350 | 3.0% per 30 days; 45 days; 80% advance |
| Higher scenario input | $2,250 / invoice (fee) | $30,000 customer settlement; $27,750 net to business | $2,250 | 5.0% per 30 days; 45 days; 80% advance |
Picture a $30,000 gap between paying a crew and collecting from a general contractor on net-45 terms. Drawn on a line and repaid over twelve months at the midpoint of the published range, the payment is roughly $3,000 a month and the total cost of capital about $6,000. If the draw is repaid in 45 days when the customer pays, the interest is a fraction of that, closer to $1,300 at the midpoint APR, because interest only accrues while the balance is outstanding.
Factoring $30,000 of invoices with a 45-day average collection at the midpoint fee (about 3% per 30 days) costs roughly $1,350. The two products are close in cost for a short gap; the line pulls ahead when the business repays quickly and factoring pulls ahead when the customer is slow and the business would rather not carry the balance. The line requires the owner's file to qualify; factoring requires the general contractor's.
At the midpoints: business line of credit costs about $2,999 per month and $35,987 in total payback (35.0% assumed annual interest; 12 months; fees excluded), and invoice factoring costs about $24,000 advanced against the invoice, $1,350 in fees and $4,650 in remaining reserve at collection (a negative reserve is an additional shortfall). The customer settles the invoice; this is not a borrower loan repayment. Every figure is an estimate using hypothetical assumptions, not a quote.
Payment estimator
Illustrative business line of credit figures for $30,000 using hypothetical rate assumptions. Switch the product to invoice factoring to compare. Your offer depends on underwriting.
$2,999 per month and $35,987 in total payback (35.0% assumed annual interest; 12 months; fees excluded).
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 | $2,637 / month | $31,650 | 10.0% assumed annual interest; 12 months; fees excluded |
| Midpoint | $2,999 / month | $35,987 | 35.0% assumed annual interest; 12 months; fees excluded |
| Higher scenario input | $3,385 / month | $40,617 | 60.0% assumed annual interest; 12 months; fees excluded |
Decision guide
Choose a line of credit when the business itself qualifies and the needs are general; it is simpler, private and cheap when draws are short. Choose factoring when the customers are the strongest part of the file, when receivables exceed what a line would cover, or when the business is too new for a line. Many B2B businesses graduate from factoring to a line as their own credit matures, and some keep both.
Start a no-obligation reviewIndustry fit
Weekly payroll against net-30 to net-60 client invoices is the archetypal factoring case. Agencies with several years of history often add a line for non-payroll needs.
Progress billing, retainage and slow general contractors make factoring efficient. Lines cover materials and mobilization before the first invoice exists.
Card and cash sales leave nothing to factor. A line of credit is the working-capital tool for inventory cycles, seasonal dips and repairs.
Firms with clean financials usually qualify for bank-like lines. Those with a few large corporate clients and lumpy billing sometimes factor the biggest invoices instead.
Qualification
A line of credit is underwritten on the business's bank statements, time in business and the owner's credit. Published guidelines: six to twelve months in business, $10,000 or more in monthly revenue and a credit score of 600 or better. Lenders count deposits, look for negative-balance days and returned items, and often open the line below the requested limit, increasing it after clean usage.
Factoring is underwritten on the receivables. The factor reviews an accounts-receivable aging report, sample invoices and contracts, and the customers' credit and payment history. Published guidelines list no minimum time in business in many cases and owner credit from 500, because the customer's credit matters most. Invoices must be for completed, undisputed work; concentration in one customer can cap the advance.
Using both
Holding both is common for B2B businesses: factor the large or slow invoices, and use the line for everything that is not a receivable. The line's lender will typically file a blanket UCC lien that includes receivables, so the factor needs a subordination or carve-out for the invoices it purchases. Sort out the lien priority before opening the second facility.
Some businesses use factoring as a stepping stone. Twelve months of factored invoices and clean bank statements build the history that line-of-credit lenders want, and the line then replaces factoring for all but the slowest-paying customers.
Watch-outs
For a gap that closes in 30 days, a line draw at a modest APR usually costs less than a factoring fee. Compare the two on the actual days outstanding.
A line lender's blanket lien and a factor's purchase of receivables collide. One facility may need to subordinate; check before signing the second.
Lenders can reduce or close inactive lines. Draw and repay periodically.
Factors verify with customers. Invoices for incomplete work or with open disputes are rejected and damage the relationship.
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
For short gaps repaid quickly, usually yes; a draw at a mid-range APR outstanding for 30 to 45 days costs less than a typical factoring fee for the same period. For long-dated receivables or files that cannot qualify for a line, factoring is often the only or the cheaper option.
Frequently. Published guidelines consider owner credit from 500 because the customers' credit carries the underwriting. Lines of credit generally require 600 or better.
No. A line is between the business and the lender. Factoring, by contrast, often involves notifying customers to pay the factor, unless a non-notification structure is arranged at a higher cost.
Published line-of-credit ranges run to $250,000. Factoring facilities run into the millions because capacity is tied to invoice volume, not a fixed limit.
A line opens in one to three business days and later draws are often same day. Factoring funds within one to three days of setup and then within a day or two per invoice.
Spot factoring, selecting individual invoices, exists but costs more than a whole-ledger facility. Many factors require a minimum monthly volume.
With recourse, invoices unpaid after a set period are charged back to you. Non-recourse factoring shifts customer insolvency risk to the factor at a higher fee, though disputes are still your responsibility.
Yes, with lien coordination. The line lender's blanket UCC filing must carve out the receivables the factor purchases, or the factor must be senior on those invoices.
Factoring, if the customers are creditworthy; it often has no minimum time in business. Lines of credit typically require six to twelve months of deposits.
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.