Cash flow is a chronic problem in manufacturing. The cost of production has to be funded before you get paid for a product, and net terms are often 30, 60, 90 days or more. Manufacturing invoice factoring, aka accounts receivable factoring, can provide the working capital you need to cover operating costs and grow your business while you wait for customers to pay.
What is manufacturing invoice factoring?
Invoice factoring is a financial service in which a business sells its accounts receivable (invoices) to a third-party factoring company at a discount, in return for immediate cash. This provides quick access to funds, improving cash flow and liquidity, while the factoring company takes responsibility for collecting the invoice from your customer. Factoring is commonly used by manufacturing companies to bridge the gap between delivering goods and receiving payment.
How manufacturing factoring works
Here's how factoring for a manufacturing company typically works at FundThrough:
Create or connect your account in minutes
Create a free account or connect your QuickBooks, and provide information about your business.
Choose which invoices to fund
Upload invoices or pull eligible ones from QuickBooks. Select which invoices you want to fund, and submit them in one click.
Get funded
Upon approval, funds are deposited into your business bank account as soon as the next business day.
Manufacturing invoice factoring benefits
Improved cash flow
Rather than waiting for customers to pay, access funding for the invoice value upfront to cover raw materials, payroll, and other immediate obligations.
Quick and easy access to funds
Once you have an established relationship, subsequent funding is often available within a couple of business days — vital for seizing opportunities and fulfilling orders.
No debt incurred
Invoice factoring is a sale of receivables, not a loan. Your business doesn't take on additional liability or burden its balance sheet with debt.
Flexible financing
Funding is based on the value of your invoices, so as your company grows and generates more invoices, the available funding can increase accordingly.
Outsourced A/R management
The factoring company takes over collecting payments from customers, freeing you from invoicing, tracking, and collections so you can focus on production.
Factoring companies for manufacturing: how to choose the best option
Choosing a manufacturing invoice factoring company is a lot like choosing any lender — you have to gather relevant information and evaluate it in the context of your situation. Here's what we recommend you learn about any manufacturing invoice factoring company you're considering:
- Funding limits
- Range from $500 to unlimited, impacting the number and size of invoices you can factor. FundThrough offers unlimited funding.
- Advance rates
- Vary from 80–95% of invoice value; FundThrough offers a 100% advance rate.
- Service level agreements
- SLAs detail the speed of invoice processing and fund disbursement. FundThrough offers same-day funding after your first invoice.
- Factoring fees
- Includes the discount rate and any hidden fees, such as service or application fees.
- Commitment levels
- Some providers require long-term contracts for all invoices; FundThrough offers spot factoring for selected invoices.
- Industry experience
- Familiarity with manufacturing invoicing and payment terms can streamline the factoring process.
- A tech-powered approach
- Some companies offer comprehensive online systems for managing factored invoices; others rely on manual processes.
- Recourse vs. non-recourse
- Recourse factoring means you're liable if the customer doesn't pay. Non-recourse protects you from that risk, but is typically more expensive.
Ready to get your invoices paid early?
Get started nowWhy manufacturing companies choose FundThrough
We give you quick, easy funding through our tech-powered platform, making factoring the best experience it can be. When you work with FundThrough, you can also expect:
- Unlimited funding based on the size of your invoices
- 100% advance rates, minus a single fee
- No hidden fees
- Flexibility to fund the invoices of your choice (spot factoring)
- No minimum funding amount requirements after your first funding
- Seamless experience with automation, AI, and integrations with QuickBooks and OpenInvoice
- Highly reviewed support team and a partner in your success
Is manufacturing factoring right for your business?
It's right for your business if you have a cash flow need and outstanding invoices for creditworthy customers. Manufacturing factoring solves cash flow challenges where they begin — with long net terms.
How does manufacturing factoring compare with other financing?
When evaluating financing options, it's important to consider various factors to find the best fit for your business.
Lines of credit
Borrow up to a set maximum and repay as you go. Low interest rates, but banks often won't extend credit to small, growing businesses — and qualifying requires years in business and extensive documentation.
Business credit cards
Easier to qualify for than a loan, with quick access to cash and reward programs. But high interest, annual fees, and the risk of overspending can add up fast.
Receivables factoring
Not a loan — no repayment obligation as long as your customer pays, no high interest rates, and no debt on your balance sheet. Relies on your customers' creditworthiness, not yours, and funding scales with your invoices.