Invoice Factoring for Startups

Get funding to grow. No debt, equity, or bank obligations needed.

According to a report by CB Insights¹, the number one reason most startup companies fail is that they run out of cash and can’t raise new capital. A startup’s valuation doesn’t change in a linear fashion over time. Instead, it rises and falls depending on new customer acquisition, sales, the market, manufacturing timelines, internal hiring, and so much more.  

Even if you make your sales goals, not all customers pay promptly, leaving you with unpaid invoices. That means you might wait for 30, 60, or even 90 days to be paid for a product or service already delivered. You end up cash poor and unable to grow your business.

While there are many small business financing options, with business loans and lines of credit as the most common, many banks traditionally don’t lend to startup companies—there’s too much risk for them. 

Fortunately, invoice factoring for startup companies can be a practical option that often serves you best. As a small business owner, you gain the working capital you need without adding more debt to your balance sheet, and keep complete control of your company without giving away equity.

Invoice Factoring for Startup Companies: How Startup Factoring Works

Consistent cash flow is critical to any business, and startups are no exception. In fact, you can utilize factoring during your growth stage until you can reach your own independent cash flow. Invoice factoring for startup companies works for almost any company in any industry. You get the cash you need to grow— for filling new orders, acquiring new customers, and entering new markets. 

FundThrough buys your selected outstanding invoices and advances the full invoice amount, minus a small fee. Instead of incurring new debt via bank loans or lines of credit, passing credit checks, and jumping through hoops to get the funds your business needs, invoice factoring is a straightforward solution to your cash flow concerns.

Plus, unlike bank financing, your credit and credit history won’t work against you when applying. Instead, your unpaid invoices are financed based on the strength of your customers’ credit. Factoring is also flexible and grows along with your business, which can be very attractive to startups growing quickly. 

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

In the past, factoring was largely misunderstood. Business bank loans and lines of credit were the traditional and accepted forms of financing, along with credit cards. Each of these different funding options have pros and cons to consider.


Costs for a new and growing business can be significant. You may need to purchase equipment and inventory, pay employees, and keep up with rent, taxes, and marketing. You may consider taking out a business loan to meet these obligations. 


  • Many business loans have relatively low interest rates when compared to many other types of funding.
  • Interest can be deductible on your taxes. 
  • Depending on your requirements, you may have access to large sums of money to be used to grow your business. 
  • On-time repayments can help improve your credit rating. 


  • Many small, growing startup businesses don’t qualify for loans. They often need cash faster than the process would allow, anyway. 
  • Most lenders have strict guidelines for loans and a lengthy review process.
  • You may need to have a good credit rating. Anything else and you may not qualify and if you do you’ll likely pay a higher interest rate.
  • Rates can fluctuate depending on the market. The more you borrow, the higher interest you may have to pay as the lender takes on more risk.
  • A startup business loan and the debt will show up on your balance sheet, which can affect the valuation of your business. 


Lines of Credit

A line of credit (LOC) is a lot like a credit card. You can borrow/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 at least two years, and will need to provide bank account information, financial statements, tax returns, and more in order to qualify. 
  • A line of credit is like a loan that needs to be repaid with interest.


Business Credit Cards

Like all forms of funding, business credit cards must be used wisely or things can go sideways very quickly. 



  • 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 

Invoice factoring for startup companies is not a loan. The application process is quick, there is no repayment obligation, no high interest rates, and no debt to record on your company’s balance sheet. Plus, many more companies will qualify.  


  • 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 startups 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.
  • If your business is seasonal, factoring can infuse cash into your business to get you through the downtimes. 
  • Your accounts receivables are used as collateral, unlike many loans or lines of credit.
  • You give up no equity or control in your business in exchange for funding with factoring. 
  • No matter the size of your business, you can use factoring. 


How Do You Choose a Startup Business Factoring Partner?

Choosing a factoring partner is a lot like choosing any lender. It pays to do your homework. There are also several questions to ask prior to starting the application process:

Does the factoring company work with startups?

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

FundThrough works with B2B startups, offering factoring for medical startups and freight broker factoring for small startups.

What advance rates does the factoring company offer?

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 small fee.

What factoring fees does the factoring company charge?  

A factoring company should be able to provide what factoring fees it charges upfront. But some companies may make it difficult to determine the total costs of using their service. FundThrough offers transparent pricing so you know any charges prior to signing an agreement. 

FundThrough pricing — 100% advance rates minus a flat fee. One upfront price.

Does the factoring company have minimums?

A minimum is the amount you must factor every period (month, each quarter, or every year). Some factoring companies offer plans that require minimums, while others do not. 

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

Cash flow is the number one problem for most startups and small businesses, especially in the early stages of growth. 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.
  • Service completion: Invoice factoring for startup companies 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 startup.
  • You can’t qualify for a business loan.
  • Your customers or clients are creditworthy.

FundThrough takes the legwork out of accounts receivables financing. Its fully automated platform is easy to navigate, its fee structure is transparent, and a customer service rep is there when you have questions. Find out what FundThrough’s clients have to say, and start factoring your invoices today. 

Our Approach to Working with Different Industries

FundThrough pays invoices in days for industries outside of this list as well.

Simple. Intuitive. Invoice Factoring for Startups.

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