Types of Factoring - We Offer
Factoring Structures - Selective Invoice Factoring
Businesses that just need to smooth out their cash flow – not overhaul it – are often perfect candidates for selective invoice factoring. This flexible approach lets you decide which customers and which invoices you want to factor, allowing you to dial in the specific amount that gives you control over when you access working capital. Using Selective Invoice Factoring, you do not have to sell all invoices.
It’s an ideal fit for companies that want to fine-tune their cash flow without committing all their receivables. By choosing specific invoices to fund, you can cover short-term needs, manage growth, and keep operations running smoothly – all on your terms.
Selective Services is ideally suited for businesses with lighter A/R activity or those with larger customer balances where no single customer makes up more than 20% of total sales. It’s ideal when you only want to factor certain invoices without committing your entire customer base.
Full Turn Factoring
“What is Full Turn Factoring” and “Benefits of Full Turn Invoice Factoring
If your business has a big customer base and lots of invoices, it can sometimes be easier – and more beneficial – to submit all customers and invoices for funding. This approach is often called Full Service or Full Turn factoring. Not only does it maximize your available funding, but it also cuts down on the internal work of tracking which invoices were sold and handling dual cash application.
Choosing between Full Turn Factoring and Selective Invoice Factoring usually comes down to first to cash need and second how much internal work you want to take on. Some business owners prefer to set up all their customers for factoring, rather than deal with the extra effort of separating factored and non-factored accounts. Let’s be honest – most business owners already wear plenty of hats. Handing off the accounts receivable management to a factoring company can free up time, reduce stress and increase accuracy while keeping cash flow consistent.
Choosing between Full Turn Factoring and Selective Invoice Factoring often comes down to how much internal work you want to manage. Many business owners decide to factor all their customers simply to keep things clean and consistent – no extra tracking or confusion about which invoices were sold and which weren’t. Let’s be real, most business owners already have enough on their plates, and letting a factoring company handle the receivables professionally can be a big time-saver.
That said, Full Turn Factoring is often better for both the business and the factoring company for several reasons:
• Concentration: Submitting all your customers helps keep customer concentration lower, which reduces portfolio risk.
• Volume: Factors love volume. The more invoices you fund, the stronger your relationship—and often, the lower your discount rate.
• Advance Rate: With a broader mix of customers, there’s less risk for the factor, which can translate into higher advance rates for you.
• Verifications: A wider customer base spreads out verification calls, reducing dependency on just a few accounts.
• Cash Application: Factoring companies use sophisticated software, so when you handle cash posting on your end, their detailed reports make it quick and easy for your staff to stay in sync.
In short, Full Turn Factoring keeps your operation simple, efficient, and scalable – while giving you more funding power and smoother cash flow.
Types of Factoring- Non-Notification
Some businesses prefer to keep their financing arrangements private – especially if they have sensitive customers or want to maintain a certain level of discretion. For those situations, there’s something called non-notification invoice factoring.
It’s not easy to qualify for – in fact, very few companies do. Most factors shy away from it because it goes against the standard practice of notifying customers that invoices have been assigned. When it’s approved, it works like a traditional factoring agreement but includes a Non-Notification Rider, which spells out exactly when and how the factor will avoid sending a Notice of Assignment. The terms are strict, and breaking them can instantly trigger a formal notice to your customers.
There are typically two ways non-notification factoring is structured:
1. Silent payments: Customers don’t receive a Notice of Assignment, but their payments are made under your business name and routed to the factor’s lockbox.
2. Client-collected payments: Customers aren’t notified at all, and you continue collecting payments yourself – with a very tight deadline to report collections and forward the funds to the factor.
To even be considered for non-notification, a factor will usually look for:
• Strong, consistent financial statements (reported monthly)
• Qualified accounting staff
• At least five years in business
• A solid track record with customers
• Low concentration (no single customer over 20%)
• Excellent personal credit from the owners
• Highly creditworthy debtors
• Clean, well-documented paperwork supporting every invoice
• A manageable number of customers with large invoice values
While the factor still verifies invoices and monitors performance, they’ll often do it quietly – through BCC’d e-mails or a hidden e-mail monitoring address – to preserve confidentiality.
Because of the extra risk and complexity, non-notification factoring usually comes with a higher discount rate and sometimes a lower advance rate. It’s a niche option, but for a demanding business, it can provide working capital while keeping financing relationships under wraps.
Types of Factoring Spot
Some factoring companies are open to what’s called a “spot” transaction — essentially a one-time deal where a business sells invoices just once, with no ongoing relationship expected. It’s a quick, short-term solution for companies that need cash fast or want to jump on a business opportunity.
The process works just like regular factoring, but everyone knows it’s a one-and-done arrangement. For a factor to consider a spot deal, a few things typically need to line up:
- The invoices should total at least $100,000
- The customers (debtors) must be financially strong and reliable
- Verification will be strict, often requiring written confirmation
Because these deals are transactional and don’t build a long-term relationship, the discount fee is usually higher – often in the 5–10% range – to offset the added risk and effort involved.
Recourse & Non-Recourse Invoice Factoring
Recourse vs. Non-Recourse Factoring: What’s the Real Difference?
When it comes to invoice factoring, there are really two main offers, recourse and non-recourse and understanding the difference can save you a lot of time (and money).
Recourse factoring is the most common. Here’s how it works: you sell an invoice to the factoring company and get cash up front, let’s say $50,000. If your customer pays, great! If not, and they go out of business, dispute goods/services or simply don’t pay, you’re responsible for buying the invoice back from the factoring company. Think of it as: you get the cash today, but you still carry the risk if your customer defaults. Because the factor has less risk, the cost is usually lower, making it a great option if your customers are reliable.
Non-recourse factoring, on the other hand, shifts more of that risk onto the factoring company. As long as your customer qualifies for credit insurance, you’re protected if they can’t pay due to insolvency or bankruptcy. So, if that same $50,000 customer went under, the factor takes the loss, not you. Sounds great, right? It is, but keep in mind non-recourse doesn’t cover every situation. If your customer disputes the invoice (maybe they say the order was wrong or incomplete), the burden of repayment falls back to you.
Here’s the quick version:
• Recourse factoring → lower cost, more responsibility on you.
• Non-recourse factoring → higher protection, but higher cost and stricter qualifications.
At the end of the day, the right option depends on your business and your customers. If your clients have strong payment histories, recourse factoring might make more sense and save you money. But if you’re working with larger accounts or want peace of mind against bankruptcy risk, non-recourse can be a smart safety net.
Types of Factoring- DIP
Factoring Snippet
· DIP factoring is only available for business-to-business sales only
· Chapter 11 only
· Minimum annual revenue is $2M
Debtor-in-Possession (DIP) Factoring: A Strategic Tool for Chapter 11 Reorganization
Filing for bankruptcy should always be a strategic decision, not a last-minute reaction. One of the most important parts of that strategy is planning for post-petition funding – because without a clear source of working capital, even the best reorganization plan can fall apart. That’s where DIP factoring comes in.
Debtor-in-Possession (DIP) factoring is a specialized niche within the factoring world. It’s designed for companies that are either preparing to file or are already in Chapter 11 bankruptcy but are still operating and generating B2B invoices.
What many business owners don’t realize is that getting factoring while in bankruptcy is absolutely possible. In fact, it can be a lifeline – providing immediate cash flow to cover payroll, pay critical vendors, and stabilize day-to-day operations. Because of the added risk and court oversight, not every factoring company offers DIP facilities. Those that do, however, understand how to navigate the process and structure funding that satisfies both the business and the court.
Some experienced factors can move very quickly – often structuring a DIP facility within 4–7 business days. When coordinated early (sometimes even pre-packaged), the facility can be incorporated directly into the bankruptcy filing itself.
When knowledge, speed, and capacity matter, having the right funding partner makes all the difference. The factor’s legal counsel will typically appear alongside your attorney during first-day motions, presenting and arguing for DIP approval before the bankruptcy court. Choosing a ready-to-fund, experienced partner at this stage helps ensure operations stay stable and that your reorganization plan has the best chance to succeed.
Businesses that are considering – or have already filed – Chapter 11 can be great candidates for DIP factoring if they show financial discipline and a clear path forward. Factors typically look for companies that demonstrate:
• Annual sales over $2 million
• A diversified customer base (so no single client dominates revenue)
• Accurate and reliable financial statements
• The ability to generate positive cash flow shortly after filing
When these elements are in place, DIP factoring provides the liquidity and confidence needed to move through reorganization – and emerge stronger on the other side.
How do I qualify for factoring?
Invoice Factoring Snippets
- Factoring Companies do not purchase bad debt or non-performing invoices
- You should have a minimum of $25,000 per month in sales to factor
- Contra accounts (selling and buying from the same customer) is often ineligible
- Pre-billing is ineligible
If you’re selling to other creditworthy businesses on terms (Net 30 to Net 90) and your annual sales are over $300,000, you’re actually a great candidate for invoice factoring.
Qualifying for factoring is simple. If your books are current (no more than 30 days behind), your accounts receivable and accounts payable reports are accurate, and you can provide the last 90 days of activity — you’re already most of the way there.
What Most Factors Will Ask for During Underwriting
When you apply for invoice factoring, the underwriting process is pretty straightforward. Most factors just want to get a clear picture of what your business provides, customer information and an overview of your accounts. Here’s what they’ll typically ask for:
- A current Accounts Receivable Aging Report — both the summary and detail versions help them see who owes you money and how long it’s been outstanding.
- A current Accounts Payable Report — usually just the summary format is fine, to understand what you owe to vendors and a review for contra accounts.
- The last 90 days of bank statements — generally from your main operating account, to show cash flow activity.
- A few sample invoices (3–4) — this helps the factor understand how and what you invoice for and the payment terms.
- A customer list — with names, contact info.
That’s usually it. If your reports are up-to-date, getting through underwriting is quick and painless — often just a hour from start to finish.
When you’re working with a factoring company, there are a few standard reports they’ll want to review. Here are some best-practice tips to help you stay organized and make the process go smoothly.
Accounts Receivable Aging Report
Keep it updated weekly.
Reconcile your report every week to make sure everything lines up — new invoices are generated, customer payments are posted promptly, and any old or written-off bad debt is removed.
Send the right report to the factoring company.
Most accounting programs give you a few options for how to view your invoices:
- By Due Date:
This method keeps invoices in the “current” column until a day past the agreed terms. It makes your report look clean, but it doesn’t really show how long an invoice has been outstanding. - By Transaction Date:
This approach starts aging an invoice from the actual date it was created — not when it’s due. It gives you a truer, more accurate snapshot of where your receivables really stand. Most invoice factoring professionals prefer this method because it reflects the true A/R position.
Accounts Payable Report
Reconcile Every Week.
Keep your payables clean and current by checking them weekly. Make sure all new bills are entered, payments are posted, and any old or duplicate items are reviewed and cleared.
Review aging by Due Date.
When reviewing your Accounts Payable report, sort or age by due date, not transaction date. This gives you the clearest picture of what’s coming up soon so you can plan payments and manage cash flow without surprises. Unlike you’re A/R report, use the payment terms offered by your supplier as an advantage.
Bank Statements
Most factoring companies will ask for your last 90 days of bank statements. They’re not digging for secrets — they just want to see how money flows in and out of your business. It helps them understand your typical cash cycle, spending habits, and overall funding needs. The goal is to tailor a financing solution that actually fits the way your business runs.
Sample Invoices & Supporting Documents
Sharing a few sample invoices and supporting purchase orders, contracts gives the factor a clear picture of what you bill for and how often. It also helps confirm that you’re invoicing after the work is completed (billing in arrears) and that your payment terms — like Net 30 or Net 60 — are clearly shown and make sense for both you and the factor.
Essentially, the more transparent and organized your documentation is, the faster and smoother the approval process will be. With the above information submitted, most factoring companies can underwrite in about an hour.
Additional Items a Factor Might Request
While most factoring companies ask for the same basic reports, it’s worth remembering that no two factoring companies operate exactly the same way. If the amount you’re looking to factor is larger – or if your company has a few bumps in its history, complex ownership, or ongoing business concerns – the factor may ask for some additional information.
These might include:
- Financial statements – both interim and the last two fiscal year-end (FYE) reports.
- Profit & Loss statement and Balance Sheet – to give a snapshot of overall business performance, financial reporting quality and financial health.
- Cash flow projections – showing expected revenues and expenses in the coming months.
- Business tax returns (last two years) – to verify reported income.
- Personal tax returns (last two years) – typically for owners or guarantors.
- Personal financial statements – from guarantors, to confirm overall financial condition.
Every factor’s process is slightly different, but having these documents organized and ready can speed up approval, provide comfort to the factor, speed up timing of funding and in many instances, influence structure.
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.