Why is my business profitable, but I still don’t have enough cash to operate?.
That’s one of the most common questions I hear from small business owners.
I’m Marc J. Marin, Founder of Gateway Commercial Finance, and after nearly three decades working with U.S. small businesses, I’ve found that cash flow problems rarely come from a lack of sales. They come from long payment terms, unpaid invoices, and waiting for Net 30, 60, 90 payment terms to get paid, while expenses keep piling up.
This is exactly why small business invoice factoring has become a practical and reliable solution for growing companies across the United States. Instead of taking on more debt or struggling to qualify for traditional business loans, invoice factoring allows small businesses to turn outstanding invoices into immediate working capital, often within days, so they can meet payroll, pay suppliers, and continue growing with confidence.
In this article, I’ll explain how small business invoice factoring works, who it’s best for, what it actually costs, and how to choose the right factoring partner. My goal is to help you make an informed, confident decision that supports long-term cash flow and sustainable business growth.
Why Small Businesses Struggle With Cash Flow (Even When Sales Are Strong)
Cash flow problems continue to be a pressing issue daily for small companies across the US, a problem that exists beyond the realm of mere sales.
As per the Small Business Index (Q3 2025) released by the US Chamber of Commerce, while most businessmen feel that the financial position of their business is relatively good, a lower number feel very comfortable about the cash-flow position compared to earlier in the year, as only 24% feel very comfortable, compared to 31% in Q3 2025. However, 74% feel comfortable. U.S. Chamber of Commerce
Industry research shows how common this disconnect is. A 2025 report on employer firms found that over 50% of small firms cite uneven cash flow as a challenge, alongside difficulties covering operating expenses such as payroll and inventory costs.
A separate study by Relay Financial Technologies reported that 88% of small businesses in the U.S. have cash flow disruptions regularly, demonstrating how common they are even for businesses with good revenue levels. In other words, most companies have to look elsewhere for financing if customers take longer than expected to pay up, or the cost of materials or raw goods suddenly spikes.
What Is Small Business Invoice Factoring?
Many small business owners find that invoice factoring isn’t “financing” per se, but more a means to fill the gap between doing the work and getting paid for it.
If you operate a business that offers credit to your customers in exchange for their purchasing your product or service, you may be making money but not being able to afford to pay salaries, stock, fuel, or rent, or meet tax payments in the absence of immediate payments from your customers. This challenge in small business invoice factoring is what invoice factoring resolves.
Rather, invoice factoring is the sale of outstanding invoices to a factoring company instead of borrowing money. The process involves receiving an advance payment, most likely within days, depending on the worth of the invoices. Upon receipt of payments from the customer, the outstanding balance is received, subject to a fee payment.
In what way is invoice factoring actually different from traditional methods of financing a business? This has to do with the following:
- Factoring is not debt
You’re not taking out a loan or adding liabilities to your balance sheet. You’re accessing cash that your business has already earned. - Approval is based on your customers, not your credit
Factoring companies focus on the creditworthiness and payment history of your customers. This makes factoring especially useful for small businesses, startups, and growing companies that may not qualify for bank loans. - Funding is fast and flexible
Since the funding is based on invoices, and underwriting is done on invoices rather than their duration, the funding can take days, rather than weeks, to materialize for businesses.
In the sense that business owners are struggling to raise capital from customers who pay slowly, or from funding associated with business growth, or because traditional credit sources may not be an option, small business factoring of invoices has more to do with unlocking the existing value in their accounts receivable rather than borrowing.
Quick Reality Check For Small Business Owners
If your business issues invoices to other businesses, you’re already acting as a lender.
Every time you wait 30, 60, or 90 days to get paid, you’re financing your customer’s operations, often without earning interest or having control over timing. Invoice factoring simply allows you to take that cash back sooner, on your terms.
How Does Invoice Factoring Work For Small Business Cash Flow?
Invoice factoring is a systematic and adaptable process that enables small companies to obtain funds quickly without going into debt. All these steps are geared to ensure that your business is not slowed down due to slow payments from clients.
Step 1: Issue an Invoice to a Creditworthy B2B Customer
First, your business provides goods or performs a service for a business and sends a bill to collect payment. The fact is, at this stage, your job is completed, and your revenue is earned, but your money is still on the books as accounts receivable.
Step 2: Submit the Invoice to a Factoring Company
Instead, you can now submit the invoice that hasn’t been settled yet to the factoring company. They analyze the invoice and the ability of the customer to pay, irrespective of the fact that you may have a bad credit record.
Step 3: Receive an Advance on the Invoice
Once the application is approved, the factoring company lends a percentage of the invoice amount, which is frequently within 3 to 5 days. The borrowed amount enables the company to pay its expenses, such as salaries, operational costs, and inventory, among others, instantly.
Step 4: Customer Pays the Factored Invoice
Your customer will pay the invoice directly to the factoring company based on the original payment terms. This does not affect the amount you will receive or the payment term due.
Step 5: Receive the Remaining Balance
After settlement of the invoice, the factoring company advances the rest to you, less the factoring fee for the invoice. The transaction is closed and does not require any repayments in the form of a loan. There is no long-term debt.
Small Business Invoice Factoring Services By Gateway Commercial Finance
Invoice factoring goes beyond a single advance of funds. While speed may be an issue for small businesses, true value comes from working with a professional with experience in financial matters who provides true benefits.
Gateway Commercial Finance offers customized small business invoice factoring solutions to help small businesses with receivables, relieve cash flow pressure, and grow with confidence.
- Funding on an invoice basis, subject to approved receivables: Release working capital from funding advances based on outstanding invoices without having to go through the long process of payment cycles.
- Accounts Receivable Support: Minimize paperwork and increase receivables transparency with expert accounts receivable management.
- Customer Credit Assessment: Gateway helps you primarily assess the creditworthiness of your customers. This helps you lend money to your customers comfortably.
- Collections support, when required: Relationship-minded collections assist in maintaining relationships with customers and making sure invoices are covered.
- Scalable and ongoing funding: As new invoices are raised, businesses can continue to have access to funding that matches business activity.
Differing from automated factoring services on the web, Gateway Commercial Finance has a relationship-based model that brings together industry knowledge and flexible models for a robust cash flow solution.
Which Invoice Factoring Service Has the Lowest Fees for Startups?
It’s completely natural that startups will look for the cheapest deal in terms of invoice factoring rates, but this can sometimes be quite misleading. This is because the rates offered in factoring are not fixed, but rather dependent mostly on certain factors such as the creditworthiness of customers, business type, and payment terms.
Since factoring companies buy invoices instead of lending money, your business’s age and your customers’ creditworthiness become relatively important factors. It’s not uncommon to find that young companies with sound business-to-business clients are offered favorable interest rates.
Startups must also exercise caution when coming across providers charging exceptionally low rates because such rates may contain hidden fees or poor customer service. The best invoice factoring service will instead provide a clear breakdown of charges, flexible payment structures, and the skill and know-how to work with startups.
Small Business Invoice Factoring Tips
Successful businesses don’t use invoice factoring reactively; they use it strategically. The following small business invoice factoring tips are drawn from real-world commercial finance experience and reflect how factoring works best in practice.
Use factoring before cash flow becomes critical
Factoring an invoice can provide the most benefit when done before a cash flow crisis becomes an actual emergency. Then, a business that chooses early factoring still has negotiating leverage, does not make decisions in a hurry, and chooses to invest cash flow for future planning rather than to address immediate needs.
Choose a factoring partner with industry expertise
Factoring is not a “one-size-fits-all” solution. Certain industry verticals like staffing, healthcare, trucking, and manufacturing have different billing cycles and risk for payments. It is essential for a business to work with a factor that knows how the industry operates. That way, approvals for funding become more streamlined and accurate.
Understand contract terms beyond the rate
Many business owners focus only on the factoring fee, but experienced operators review:
- Contract length and exit flexibility
- Recourse vs non-recourse terms
- Minimum volume requirements
- How do fees change if customers pay late
A clear understanding upfront prevents surprises later.
Communicate openly with customers
Factoring works best when customers understand payment expectations clearly. Professional factoring partners handle this process carefully, helping preserve customer relationships while ensuring invoices are paid on time.
Use factoring to support growth, not just survival
High-performing businesses use factoring to:
- Take on larger contracts
- Scale payroll confidently
- Improve supplier relationships
- Smooth seasonal cash flow swings
When used strategically, factoring becomes a growth tool, not a short-term fix.
Reassess Your Factoring Strategy As Your Business Evolves
And as your business expands, your customer base, invoices, and risk exposure will change. Occasionally, assessing your factoring agreement helps you ensure your agreement remains relevant to your business objectives.
But it is best to avoid holding out until you find yourselves in a cash flow crisis. The best way to utilize invoice factoring is proactively for improving cash flow, ensuring that your small business always remains stable, competitive, and, most of all, ready for opportunity.
What Are The Best Invoice Factoring Companies For Small Businesses?
The top invoice factoring businesses for small businesses require more than speed when it comes to finances, including experience, transparency, industry expertise, and relationships.
Gateway Commercial Finance is known to be one of the foremost factoring companies in the United States because of its rich knowledge in commercial finance. It has been set up by Marc J. Marin, who has close to thirty years of experience in the area and has accomplished factoring transactions in excess of $4 billion. The major focus of its operations is on real-world cash flow problems.
Gateway offers specific factoring solutions for the B2B sectors like staffing, medical, manufacturing, logistics, and professional services. Gateway puts forth the effort to understand the business as well as its customers and aims for growth rather than depending on automated platforms that rely on a one-size-fits-all system. This ultimately enhances cash flow and receivables management.
When evaluating the best invoice factoring companies, successful small businesses typically look for:
- Proven experience with small and growing companies
- Transparent pricing and flexible terms
- Industry-specific knowledge
- Fast funding with responsive support
- A relationship-driven approach
In fact, these attributes are just as important as speed to funding for owners of small businesses as a way to gain reliability, knowledge, and a partnership relationship, which is why many small U.S. businesses turn to experienced providers such as Gateway Commercial Finance.
How To Apply For Invoice Factoring As A Small Business Owner?
Invoice factoring through Gateway Commercial Finance is designed to be quick, transparent, and with one focus in mind: getting the business funded with no unnecessary paperwork or delays.
Step 1: Share basic business information
It entails a brief overview of your business, industry, history of operation, and type of customers catered to. This helps Gateway understand if invoice factoring is a good fit for your situation.
Step 2: Provide customer and invoice details
Next, you submit information about the customers you invoice and the outstanding invoices you’d like to factor. Since factoring is based on receivables, this step is central to the approval process.
Step 3: Customer credit review
The creditworthiness or payment history of your customers is evaluated by Gateway Commercial Finance, and not your personal credit history. This way, it’s possible for small or growing companies that are not approved by banks to still qualify.
Step 4: Approval and funding
After approval, funding can be arranged promptly. Many times, business owners can expect to receive the initial funding advance within days, gaining immediate access to funds for working capital based on invoices.
Although the procedure is centered on invoices and customers, the approval times are greatly faster compared to the typical underwriting procedures. This makes invoice factoring from Gateway Commercial Finance an efficient and viable option for small companies that require a stable flow of funds to run and develop.
Real-World Insights From a Commercial Finance Expert
After three decades in commercial finance, the one message that has emerged is that businesses do not fail for lack of sales; they fail because the cash runs out at the wrong time. Delays in the receipt of payments and an uneven nature of cash flow can silently destroy the most profitable businesses.
Thousands of small and mid-sized businesses have learned from experience that it’s cash-flow timing, not just revenue alone, that provides long-term stability and growth. The most successful companies strategically use small business invoice factoring to smooth cash flow, ensure payroll, maintain stronger relationships with suppliers, and jump on new opportunities without waiting for invoices.
It’s an operation that adds visibility, flexibility, and control when applied to a larger cash-flow strategy to keep your company resilient and agile as it grows.
Hi Marc, if you’d like, you could add a couple of points from your real experience here. It would add strong credibility and help the piece stand out.
Frequently Asked Questions
Is invoice factoring a loan?
No. Invoice factoring is not a loan. With providers like Gateway Commercial Finance, businesses sell unpaid invoices for immediate cash instead of borrowing money. This means no debt, no loan repayments, and no impact on traditional debt ratios.
Does invoice factoring affect my credit?
Invoice factoring typically does not depend on your personal credit score. Companies such as Gateway Commercial Finance evaluate the creditworthiness of your customers instead, making factoring accessible to small businesses, startups, and owners who may not qualify for bank financing.
How fast can I get funding with invoice factoring?
In this case, when one involves a professional factor, such as Gateway Commercial Finance, funding will occur between 3 and 5 days after being approved. This makes factoring one of the quickest methods of advancing the cash flow of small businesses compared to any other form of loan or line of credit.
Is invoice factoring confidential for my customers?
Yes. Gateway Commercial Finance offers confidential and non-notification factoring options in many cases. This allows businesses to access working capital while maintaining normal customer payment processes and protecting long-standing client relationships.
What types of small businesses work best with invoice factoring?
Invoice factoring works best for B2B small businesses that invoice creditworthy customers, including staffing, healthcare, trucking, manufacturing, and distribution companies. Providers like Gateway Commercial Finance specialize in these industries, where delayed payments are common.
Is Small Business Invoice Factoring Right for You?
If your business is profitable but frequently waits on customer payments, small business invoice factoring may be the missing piece in your cash-flow strategy. Cash gaps don’t signal a failing business, they usually reflect slow payment cycles that don’t match the pace of real operating expenses.
Invoice factoring is a strong fit for businesses that invoice other companies, work with creditworthy customers, and need faster access to working capital without taking on debt or navigating restrictive bank requirements. When used strategically, factoring helps stabilize operations, support growth, and give business owners greater control over timing and planning.
Before moving forward, consider your industry, customer payment patterns, and long-term goals. Working with an experienced partner who understands your business can make a meaningful difference in how effective factoring is over time.
If you’re exploring whether invoice factoring makes sense for your situation, speaking with an experienced provider like Gateway Commercial Finance can help clarify your options. A short conversation can often reveal whether factoring is the right fit, and how it could support your business as it grows.
About the Author:
Marc Marin is a seasoned expert in business financing, author, speaker, and educator with over 20 years of experience helping companies access working capital through factoring and funding solutions. He is known for making complex financial topics clear and actionable for business owners and finance professionals.
