How Invoice Factoring Actually Works for Manufacturers
You issue net-30, net-60, or net-90 invoices, but payroll, materials, and rent don't wait. Invoice factoring turns those unpaid invoices into cash within 24 hours of verification—so you can run the shop off the same receivables you're already producing.
The mechanics
You produce and ship. You issue the invoice. You send a copy to your factor. The factor verifies the invoice with the customer and advances 80–95% of face value—typically same or next business day. Your customer pays the factor on the original terms. The factor releases the reserve minus a small fee.
What it costs
Factoring fees run 1.5%–3.5% of invoice face value per 30 days outstanding. On a $100k invoice paid in 45 days, expect fees of $2,000–$4,500. Compared to daily-repayment MCAs (often 40%+ effective APR) or the cost of turning down a big order, it's the cheapest capital in the market for a growing shop.
- Advance rate: 80–95% (higher for commercial/government AR)
- Fee: 1.5–3.5% per 30 days
- No application, origination, or closing fees when placed through Manufactor Finance
What underwriting cares about
Factoring is credit-approved on your customers, not you. Underwriters look at: who you sell to, how they pay historically, invoice quality (delivered goods with clean POs), and any concentration or seasonal patterns. Your credit score matters far less than in bank lending.
Where it stops making sense
Once you cross $15M+ revenue with clean monthly financials and a controller, ABL is meaningfully cheaper. We structure factoring facilities to transition cleanly when you're ready.