Manufacturing Invoice Factoring

Boost your cash flow in days

Doing business in the manufacturing industry comes with many costs. Cash flow can easily become an issue for many manufacturers as they buy equipment, materials, and supplies, make payroll, fund the cost of production before being paid for a product, and work to grow their businesses. Keeping ahead of any cash flow issues is why so many business owners turn to manufacturing invoice factoring solutions.

Manufacturing invoice factoring, aka accounts receivable factoring, can provide the much-needed capital you need to cover operating costs and grow your business while waiting on net payment terms from your customers. But just how exactly does factoring for manufacturing companies work, and how do you know if it’s right for your manufacturing business? This guide has you covered with everything you need to know about factoring services for manufacturing.

What Is Manufacturing Invoice Factoring?

Manufacturing invoice factoring is a financial arrangement that allows manufacturing companies to access immediate cash flow by selling their accounts receivable (invoices) to a third-party company, known as a factor.

In the manufacturing industry, companies often face cash flow challenges due to the time gap between completing a product or service and receiving payment from their customers. This gap can be particularly long in manufacturing, as it involves various stages such as production, shipping, and distribution.

Invoice factoring with manufacturing factoring companies helps address this cash flow gap by providing an immediate infusion of funds.

It doesn’t matter if you manufacture electronics, plastics, furniture, coffee cups, pet food, can openers, or any other product. Problems with cash flow can interrupt your business and stop business growth in its tracks. Accounts receivable factoring for manufacturing companies gives you fast access to the capital you’ve already earned via your outstanding receivables.

How Manufacturing Factoring Works

Here’s how factoring for a manufacturing company typically works:

  1. Manufacturing companies deliver their products or services to their customers and generate invoices for the amount owed.

  2. Instead of waiting for the customers to pay, the manufacturing company sells those invoices to a factoring company like FundThrough at a discounted rate. The discount rate, also known as the factor rate, is usually a percentage of the total invoice amount.

  3. The manufacturing factoring service pays the manufacturing company a significant portion (usually around 70% to 90%) of the invoice value upfront, providing immediate cash flow. FundThrough offers 100% advance rates, less one flat fee.

  4. The factoring company takes over the responsibility of collecting payment from the manufacturing company’s customers. (If this concerns you, see how we work with your customers.)

Manufacturing Invoice Factoring Benefits

Manufacturer factoring offers several advantages to manufacturing companies. Here are some of the key benefits of manufacturing factoring:

1. Improved Cash Flow: One of the primary benefits of invoice factoring services is the immediate infusion of cash it provides. Rather than waiting for customers to pay their invoices, you can access funding for the invoice value upfront. This helps bridge the cash flow gap and provides funds to cover operational expenses, such as raw materials, payroll, and other immediate financial obligations.

2. Quick and Easy Access to Funds: Manufacturer invoice factoring is typically a fast and straightforward process compared to traditional financing options like bank loans. Once you have an established relationship with a factoring company, subsequent funding can be obtained quickly, often within a couple of business days. This rapid access to funds can be vital for manufacturers who need to seize business opportunities, fulfill orders, or address unexpected expenses promptly.

3. No Debt Incurred: Unlike a loan, invoice factoring does not create debt. It is not a form of borrowing, but rather a sale of accounts receivable. This means that your business is not taking on additional financial liability or burdening its balance sheet with debt. Manufacturer invoice factoring can be a useful option for companies that want to avoid traditional debt financing, or that do not qualify for traditional bank loans.

4. Flexible Financing Option: Invoice factoring provides flexibility. The funding amount is based on the value of the invoices, allowing your business to access funds in proportion to your sales volume. As your company grows and generates more invoices, the available funding can increase accordingly. This scalability makes invoice factoring an adaptable financing solution that can support the changing needs of your business.

5. Outsourced Accounts Receivable Management: When invoices are factored, the factoring companies for manufacturing take over the responsibility of collecting payments from customers. This relieves you of the administrative tasks and costs associated with accounts receivable management, such as invoicing, tracking payments, and collections. By outsourcing these functions to the factoring company, you can focus on your core competencies and save time and resources. (If this concerns you, see how we work with your customers.)

It’s important to note that while the manufacturing invoice factoring process offers numerous benefits, each company’s situation is unique. Be sure to carefully evaluate the costs, terms, and reputation of the factoring company before entering into a factoring agreement to ensure it aligns with your specific financial needs and goals.

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 know which questions to ask and evaluate the answers in the context of your situation. Here’s what we recommend asking:

Does the factoring company work with manufacturers?

Most factoring companies work with most industries, but not all. Some factors specialize in only a few industries.

FundThrough works with manufacturers.

What advance rates does the factoring company offer?

The advance rate is the portion of your invoice that the factor gives you immediately; they hold the rest until the invoice is paid and then forward you the remaining balance minus their fee. Advance rates can range from 60% to 100%, depending on the factoring company and sometimes the industry.

FundThrough advances 100% of the invoice amount, less a fee.

What factoring fees does the factoring company charge?

A factoring company should be able to provide what factoring fees it charges upfront. This can include both the discount rate – the percentage the factor keeps as their main fee – and hidden fees, such as maintenance fees. A low advance rate could mean that you’ll face multiple hidden fees, so it makes sense to ask any factor you’re considering to explain their fee structure including the total cost of factoring invoices.

See FundThrough’s pricing here. We don’t charge any hidden fees.

Does the factoring company have minimums?

A minimum is the amount you must factor every period (every month, quarter, or year) or a requirement to fund all invoices to a customer. Some factoring companies offer plans that require minimums, while others do not.

FundThrough doesn’t require minimums. Only fund when you need to.

How Does Manufacturing Factoring Compare With Other Kinds of Business Financing?

When evaluating financing options for your business, it’s important to consider various factors to determine the best fit. To help you make an informed decision and select the one that best meets your business needs, we’ve broken down the pros and cons of some of the most popular manufacturing financing options.

Lines of Credit

A line of credit (LOC) is a lot like a credit card. You can withdraw money up to a certain maximum amount determined by your financial institution. You can cover day-to-day expenses and pay back your debt, only to borrow again when needed.


  • You can borrow when you need it.

  • When you’re short of cash, you can borrow only what you need as long as you don’t exceed your limit.

  • Making on-time payments can help improve your credit score.

  • Lines of credit can have low interest rates.

  • The payments on the line of credit vary and vary depending on your outstanding balance.



  • As with loans, oftentimes banks won’t give small, growing businesses a line of credit. They often need cash faster than the process would allow, anyway.

  • There will be limits on the maximum amount you can borrow, which might not always be enough.

  • Although you pay-as-you-go, if you miss payments, are late, or move outside the terms of your agreement, you might face high fees.

  • It’s easy to misuse a line of credit (just like it’s easy to misuse a credit card).

  • If your business fails, you are responsible for any payments and debt incurred from using your line of credit.

  • You need to have been in business for years and will need to provide bank account information, financial statements, tax returns, and more to qualify.


Business Credit Cards

Like all forms of funding, business credit cards can be helpful in the right situations.


  • It’s easier to qualify for a business credit card than for a line of credit or business loan.

  • You have quick access to the cash you need when you need it.

  • Many business credit cards have reward programs or incentives, like cash back or airline miles.

  • A business credit card can help build credit, which is helpful if you ever need to apply for a bank loan.



  • You may need to provide a personal guarantee to qualify.

  • High interest, annual fees, and late charges can add up, especially if funding a large expense.

  • Many business credit cards do not offer purchase protection.

  • Business credit cards come with security risks like fraudulent charges from unauthorized use and stolen credit card numbers.

  • You risk overspending.


Receivables Factoring

Account receivable factoring for manufacturing is not a loan. The application process is quick. There is no repayment obligation as long as your customer pays their invoice, no high interest rates, and no debt to record on your company’s balance sheet. Plus, many more companies will qualify for factoring for manufacturers. 


  • You have access to fast cash when you need it based on the value of your invoice(s).

  • Cash advances can greatly improve shortfalls in cash flow due to slow-paying clients.

  • Does not require your business to have a long credit history, which is best for start-ups and fast-growing firms.

  • Factoring relies on the creditworthiness of your customers, not yours.

  • Invoice factoring is easier to obtain than most other forms of funding.

  • Funding can increase with the value of your invoices. (FundThrough offers unlimited funding.)

  • If your business is seasonal, factoring can infuse cash into your business to get you through the downtimes.

  • No additional debt on your balance sheet

  • You give up no equity or control in your business in exchange for funding with factoring.



Cash flow is the number one problem for most start-ups and small businesses, especially if they’re growing. This is also true for manufacturing companies. Invoice factoring companies typically consider several situations before offering you an advance.


  • Nature of the business: you must be a registered business selling goods or services to other businesses (B2B only).

  • Service completion: invoice factoring is only available for goods or services that your clients have marked as complete or delivered.

  • Encumbrance-free invoice: since invoices are the only collateral in a factoring arrangement, encumbrances such as tax liens can make it difficult to qualify for factoring. (But not impossible. FundThrough works with businesses on IRS and CRA tax payment plans all the time. We can even help you with getting an arrangement set up).


Factoring invoices is a sound financial strategy if you:

  • Spend time tracking down slow-paying customers and waiting 30, 60 or 90 days to be paid, which puts a tremendous burden on your business.

  • If you’ve delivered a product or provided a service to another business.

  • If you have slow times, downtimes, or your business is cyclical.

  • You experience times of cash flow crunch.

  • You need access to working capital to grow as a wholesale company.

  • You can’t qualify for a loan.

  • Your customers or clients are creditworthy.

What Is Invoice Finance for Manufacturers?

Invoice finance for manufacturers is a financial solution that enables manufacturing companies to access working capital by using their unpaid invoices as collateral. It’s another term for invoice factoring. With invoice factoring for manufacturers, manufacturing companies sell their invoices to a factoring company at a discounted rate in exchange for a cash advance on the value of the invoice.

How Does Invoice Financing for Manufacturers Work?

Invoice financing for manufacturers works by using unpaid invoices as collateral to access immediate cash flow. You submit your outstanding invoices to a factoring company, who gives you an advance on the value of your unpaid invoice. You put your money to work immediately, while the factoring company works with your customer to settle the invoice according to the original payment terms.

Simple. Intuitive. Manufacturing Invoice Factoring.

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