By Marc J. Marin for Forbes
April 9, 2026
For three decades, I’ve watched businesses struggle with cash flow in ways that are both predictable and preventable. What’s changed recently is the scale of the problem. A very real shift is happening in how large companies manage their cash, and their suppliers are the ones absorbing the cost.
Companies like Mars, Kellogg, Kraft and Procter & Gamble have quietly extended their payment terms to net 75, net 120, even net 130. Late payments are becoming more common. As a result, suppliers are effectively financing some of the world’s largest companies, whether they signed up for it or not.
At the same time, the traditional safety net is fraying. The Federal Reserve’s Senior Loan Officer Opinion Survey continues to show tighter credit standards for commercial and industrial loans. The industries hit hardest by extended payment terms, including manufacturing and transportation, are also seeing the biggest pullbacks in lending. And alternative financing options like private credit and merchant cash advances (MCAs) are either shrinking or becoming unsustainable.
Invoice Factoring Steps In
So, where does that leave businesses caught in the middle? For a growing number of them, the answer is invoice factoring. The concept is simple: Instead of waiting 30, 60 or 120 days for a customer to pay, a business sells that invoice to a factoring company, which advances most of the money right away. Once it collects the full payment from the customer, the remaining balance comes back to the business, minus a small fee. Think of it as turning money you’re owed later into cash in your account now.
Factoring has traditionally carried a stigma as a last resort, but that reputation is outdated. Pricing has become far more competitive, and technology has sped up adoption considerably. Underwriting that once took days can now happen in less than an hour, and funding can be in place within days. Integration with accounting platforms means businesses can access liquidity with minimal friction.
Major institutions have taken notice: Wells Fargo, Citibank, JPMorgan, Fifth Third and HSBC all have dedicated factoring divisions. Intel, Coca-Cola, Goodyear, Warner Bros. and T-Mobile factor billions of dollars a year.
What Business Leaders Should Know
Factoring isn’t necessarily right for every company. A good starting point is an honest assessment of where you stand with traditional financing. Most businesses that use factoring fall into one of two categories: pre-bankable, meaning they’re growing but don’t yet meet bank criteria, or non-bankable, meaning traditional lending simply isn’t an option. If a bank is willing to lend at competitive rates, that conversation should happen first. But if you’ve already tried and come up short, factoring deserves a look.
Cost is the first thing to evaluate, and the numbers are more favorable than most people expect. What used to cost 4% or 5% for 30 days can now be as low as 1% to 1.25%. On an annualized basis, larger borrowers often come in around 9% all-in, middle market companies typically under 14% and small businesses generally under 20%. Compared to merchant cash advances or some private credit structures, factoring is often the most rational option.
The other thing to understand is that factoring works best when you plan for it rather than reach for it in a crisis. Banks are asking tougher questions, and availability is starting to shrink. If you’re picking up on those signals, now is the time to understand your options before you actually need them. The best factoring relationships involve good quality receivables that simply take longer to pay. That means credit quality matters; a Walmart receivable and a Bed Bath & Beyond receivable are very different things, and any reputable factor will tell you that upfront.
Factoring is on the rise because people are finally understanding that it offers a flexible, cost-effective way to turn receivables into cash when businesses need it most. It’s not glamorous, but when cash is coming in slower and borrowing is getting harder, reliable and straightforward counts for a lot.
Original Article here https://www.forbes.com/councils/forbesfinancecouncil/2026/04/09/when-suppliers-become-lenders-why-invoice-factoring-is-gaining-ground/
