Manufacturing factoring lets a manufacturer sell its unpaid customer invoices to a factoring company for an upfront advance, usually most of the invoice value, instead of waiting 30, 60 or 90 days for the customer to pay. The factor collects from your customer and sends you the rest, minus its fee. It is one of several working capital options covered in our manufacturing business loans hub.
Manufacturers feel the cash gap more than most businesses. You pay for raw materials, labor and energy before a part ships, and many industrial buyers pay on net terms. Factoring turns those receivables into cash so the next production run is not held up by the last one.
How manufacturing factoring works
- You ship the order and invoice your customer. The factor will want proof the goods were delivered and accepted.
- You submit the invoice to the factor. The factor checks the invoice and your customer’s credit. Charter Capital, for example, says it “will verify the invoice” and offers “free credit reports on customers.”
- The factor advances a percentage of the invoice. This is the advance rate. The rest is held as a reserve.
- Your customer pays the factor. Payment is redirected to an account the factor controls.
- The factor releases the reserve, minus its fee. The longer the customer takes to pay, the higher the fee usually is.
Factoring is a sale of receivables, not a loan. Riviera Finance puts it this way: “Unlike a loan, invoice factoring does not create debt. It is not a form of borrowing, but rather a sale of accounts receivable” (Riviera Finance). That is why the decision leans on your customers’ credit more than on yours.
What manufacturing factoring costs
Factors price with a factoring fee (also called a discount rate): a percentage of the invoice’s face value, charged for a set period such as the first 30 days, with more added if the invoice stays unpaid longer. That is different from an APR, which expresses the cost of credit as a yearly rate. A 2% fee for 30 days is roughly 24% a year when annualized, so compare offers on the same basis. Our guide to invoice factoring rates goes deeper on pricing models.
Figures checked on September 21, 2026, from each company’s own manufacturing page. They are published ranges, not quotes.
| Factor | Advance rate as published | Fee as published | Funding speed | Recourse and contract terms |
|---|---|---|---|---|
| altLINE (a division of The Southern Bank Company) | “80-90% of the invoice’s face value” | Initial fee of 0.90–3.50% for an initial period “typically 30 days”; incremental fees of 0.25–1.50% “per charge” after that | “within about 24 hours of submission” | Recourse only |
| Charter Capital | “typically ranging from 70 – 90% of the invoice” | Available on request (“no-obligation factoring estimate”) | “same-day payments available” | “don’t require long-term commitments” |
| Riviera Finance | “usually around 70% to 90%” | Available on request | “verifies & pays you within 24 hours” | Page says “Riviera takes on all the credit risk”; non-recourse factoring listed as a service |
| Porter Capital | Available on request | “Rates as low as 0.4%” (period not stated) | “financing in as little as 24 hours” | Non-recourse listed as a separate service |
| FundThrough | “100% advance rate,” minus a single fee | Single fee; amount available on request | Next business day after approval; same day after the first funding | Spot factoring of selected invoices |
Sources: altLINE, Charter Capital, Riviera Finance, Porter Capital, FundThrough.
Several of these pages do not publish a fee, or give a starting rate without saying what period it covers. Ask each factor for a written example priced on one of your real invoices, showing the advance, every fee and what happens if the customer pays at day 45 or day 75 instead of day 30. altLINE’s structure shows why this matters: its incremental fees “typically increase the longer your invoice remains outstanding.”
Facility sizes vary widely. Porter Capital’s manufacturing page lists example facilities from $200K for a shoe manufacturer to $4M for a vending machine manufacturer, and Charter Capital says it works with manufacturers “from smaller machine shops to larger production operations.”
Who qualifies and what factors look at
Because the factor is buying your customers’ promises to pay, the main questions are about them:
- Customer credit. Invoices to established businesses with a record of paying are easier to fund. altLINE says invoices “for customers who have shown an inability to pay may not be eligible.”
- Invoice age. altLINE says it “will consider invoices that are 30 to 90 days outstanding.”
- Completed, accepted orders. Invoices for goods that have shipped and been accepted are the cleanest. Progress billing, consignment stock and orders still subject to inspection are harder to factor.
- Existing liens. If a bank already holds a blanket lien on your receivables, the factor will need it released or subordinated.
- Your own credit. It counts for less than it does for a bank loan. Charter Capital says factoring is “available to businesses that have a poor credit score.”
Expect to provide an accounts receivable aging report, a customer list, sample invoices with proof of delivery, and your formation documents. Factors typically file a UCC lien on the receivables they buy; see what a UCC filing is.
Factoring vs. other manufacturing working capital
| Option | What it funds | Main trade-off |
|---|---|---|
| Invoice factoring | Cash against invoices already issued | Fees rise with slow payers; customers pay the factor |
| Purchase order financing | Supplier or material costs to fill a confirmed order | Needs a confirmed order from a creditworthy buyer and a reliable supplier |
| Asset-based line of credit | Revolving credit against receivables and inventory | Borrowing base reports and field exams |
| SBA 7(a) Working Capital Pilot | Asset-based or transaction-based lines up to $5 million | Bank underwriting; needs 12 months of operations and regular reporting |
| Bank line of credit | General working capital | Harder to qualify for; limit may not grow with sales |
The SBA describes its Working Capital Pilot as offering an “Asset-Based WCP loan which allows manufacturers to draw working capital against their inventory and accounts receivable” and a “Transaction-Based WCP that can support up to 100% of related expenses,” with a maximum loan of $5 million (SBA). To be eligible, a business needs “a history of 12 full months of operations prior to filing an application” and must be able to “produce timely and accurate financial statements, accounts receivable and accounts payable agings, and inventory reports” (SBA types of 7(a) loans). For a newer shop or one growing faster than a bank line allows, factoring is often the quicker bridge.
If the problem is funding materials before you can invoice, factoring alone will not solve it. Look at purchase order financing, and read how the two work together in combining PO financing and invoice factoring. Larger manufacturers with inventory and equipment to pledge may get lower pricing from asset-based loans.
Recourse or non-recourse?
With recourse factoring, you must buy back an invoice your customer does not pay. With non-recourse, the factor absorbs the loss if a covered customer cannot pay, usually because of insolvency, not because of a dispute over quality or delivery. FundThrough’s summary: “With non-recourse, you’re protected from that risk, but it’s typically more expensive.” altLINE offers recourse only; Riviera Finance and Porter Capital list non-recourse services. Read the contract’s definition of a covered loss. See recourse vs. non-recourse factoring.
Pitfalls for manufacturers
- Quality disputes and returns. If a customer rejects a batch or takes a credit for defects, that invoice may be charged back to you, even under non-recourse. Keep inspection and acceptance records.
- Customer concentration. Many manufacturers sell most of their output to a few buyers. Factors may cap how much they will fund against any one customer.
- Minimums and term length. Check for monthly volume minimums, termination fees and whether you must factor all invoices or can choose. Spot factoring lets you pick single invoices; see spot factoring explained.
- Fees that grow with slow payers. If a large customer routinely pays at 75 days on net-30 terms, price the deal at 75 days.
- Customer notification. Most factoring means your customers pay the factor. Talk to key accounts first so a remittance change does not cause confusion; see customer notification in factoring.
FAQ
Is manufacturing factoring a loan?
Standard factoring is a sale of your invoices, not a loan, so it does not add debt to your balance sheet in the usual sense. Some companies offer lines of credit secured by receivables instead, which are loans. Check which one you are signing.
How much of each invoice will I get upfront?
The factors above publish advance rates from 70% up to 100% of the invoice, less fees. Your rate depends on your customers’ credit, your industry and your dilution history (returns, credits and disputes).
Can a new manufacturer use factoring?
Often, yes, because approval leans on your customers’ credit. You still need completed orders, clean invoices and proof of delivery.
Can I factor invoices to overseas customers?
Some factors fund export receivables, sometimes alongside credit insurance. Our import and export financing guide covers export factoring and government-backed export programs.
Next step
Before you talk to any factor, pull your receivables aging and note each customer’s real days-to-pay. With that in hand, our manufacturing business loans page explains how we compare factoring, asset-based and bank offers from the lending partners we work with, so you can see the terms side by side.
Sources
- altLINE: Manufacturing factoring
- Charter Capital: Invoice factoring for manufacturing
- Riviera Finance: Manufacturing invoice factoring
- Porter Capital: Manufacturing company factoring
- FundThrough: Manufacturing invoice factoring
- SBA: Increasing access to capital for manufacturers
- SBA: Types of 7(a) loans
About this page. Written by Ezra Cabrera, Content Team Lead at SMB Compass. Figures were checked against the primary sources listed above on September 21, 2026; lenders change their terms, so confirm current terms before you apply, and let us know if you spot a figure that has changed. SMB Compass is a business financing broker: we don’t lend our own money, and we are paid by the lenders we place loans with. This page is general information, not financial, legal or tax advice.