Quick Answer: Accounts receivable financing lets you borrow against outstanding customer invoices — turning unpaid bills into immediate working capital without waiting 30, 60, or 90 days.
When your business has outstanding invoices but needs cash now, accounts receivable financing provides immediate liquidity. Unlike invoice factoring (where you sell invoices), AR financing uses your invoices as collateral for a line of credit or short-term loan — giving you flexibility while maintaining customer relationships.
Types of Accounts Receivable Financing
| Product | Structure | Best For | Advance Rate |
|---|---|---|---|
| AR Line of Credit | Revolving facility secured by invoices | Ongoing working capital needs | 70-85% of eligible AR |
| Invoice Factoring | Sell invoices at discount; factor collects | Full outsourcing of collections | 80-95% advance |
| Invoice Discounting | Borrow against invoices; you collect | Maintaining customer relationships | 70-90% advance |
| Asset-Based Lending | AR + inventory + equipment as collateral | Manufacturing, wholesale, distribution | 70-85% on AR |
How Accounts Receivable Financing Works
1. Submit your outstanding invoices to the lender. 2. Lender verifies invoice quality and customer creditworthiness. 3. Lender advances 70-90% of eligible invoice value immediately. 4. Your customer pays the invoice (you or the lender collects, depending on structure). 5. Lender releases the remaining reserve minus fees.
Who Qualifies?
- B2B businesses with creditworthy customers (consumer invoices generally ineligible)
- Invoices with 30-120 day payment terms
- No minimum business credit score — lender focuses on your customers’ creditworthiness
- Minimum invoice volume: typically $25,000-$50,000/month for most lenders
AR Financing vs. Invoice Factoring
AR financing (lending against invoices) keeps you in control of collections and customer relationships. Invoice factoring (selling invoices) transfers collection to the factoring company. AR financing typically has lower fees but requires more financial strength from the business owner.
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Sources: Federal Reserve SBCS 2023; Commercial Finance Association Annual Survey 2023. Last updated: May 2026. Small Business Loans Today is an affiliate publisher — not a lender.