Invoice Factoring for Manufacturers
Turn 30- to 90-day invoices to OEMs, distributors and retailers into cash for materials, payroll and the next production run.
Turn 30- to 90-day invoices to OEMs, distributors and retailers into cash for materials, payroll and the next production run.
Updated September 2026
Invoice factoring for manufacturers advances 75–90% of invoices to OEMs, distributors and retailers, usually for about 1–3.5% per 30 days outstanding, and pays the balance, less the fee, when the customer pays. It suits manufacturers whose customers take 30 to 90 days to pay while materials and payroll are due now. Terms depend mostly on the customers: large, creditworthy buyers factor well, while heavy retail deductions, a single dominant customer or invoices billed before delivery reduce the advance.
| Advance rate | 75–90% of the invoice |
|---|---|
| Fee | About 1–3.5% per 30 days outstanding |
| Customers that factor best | Established OEMs, national distributors and large retailers |
| Setup | 1–3 weeks, including customer credit checks |
| Ongoing funding | Typically 24–48 hours after shipment and invoicing |
| Documents per invoice | Invoice, purchase order and proof of delivery |
| Minimum | Around $25K a month in invoices |
| Pairs with | Purchase-order financing for materials; equipment financing for machines |
| Invoice owed by | Advance | Fee per 30 days |
|---|---|---|
| Large OEM or national distributor | 85–90% | 1.0–2.0% |
| Big-box or national retailer | 75–85% | 1.5–3.0% |
| Mid-size commercial customers | 80–85% | 2.0–3.5% |
| One customer over half of sales | 70–80% | 2.5–3.5% |
Fees are per 30 days the invoice is outstanding. Retail invoices get lower advances because chargebacks and deductions can reduce what the retailer actually pays.
Illustrative outcomes for one invoice. The advance arrives when the invoice is funded; the balance, less the fee, arrives when the customer pays.
| Example | Invoice | Advance now | Fee | Balance later |
|---|---|---|---|---|
| Parts order to an OEM, paid in 45 days85% advance · 1.5% per 30 days × 2 | $150,000 | $127,500 | $4,500 | $18,000 |
| Shipment to a national retailer, paid in 60 days80% advance · 2% per 30 days × 2 | $90,000 | $72,000 | $3,600 | $14,400 |
| Order to a regional distributor, paid in 30 days85% advance · 2.5% per 30 days × 1 | $40,000 | $34,000 | $1,000 | $5,000 |
Fee shown as the rate times the number of 30-day periods the invoice is outstanding, counting a partial period as a full one. Agreements differ; some charge by the day or in 10- or 15-day steps.
A manufacturer pays for materials, energy and labor weeks before a product ships, then waits 30 to 90 days after shipping to be paid. A growing order book makes the gap wider: the bigger the order, the more cash sits in raw materials, work in process and receivables at the same time. Factoring turns the receivable end of that cycle into cash within a day or two of shipping, which is why it is common in apparel, food production, packaging, machined parts and contract manufacturing.
A factor is buying the right to be paid by your customer, so it underwrites your customer list more closely than your own balance sheet. Large manufacturers and national distributors with long payment records bring the best terms. Big-box retailers pay reliably but take deductions, so advances are lower. A customer base spread across many buyers is better than one dominant account; many factors cap how much of the funded total can be owed by a single customer, often somewhere between a quarter and a half.
Retail customers routinely deduct from payments for compliance penalties, late or short shipments, damaged goods, promotional allowances and returns. To a factor, every deduction is a shortfall on an invoice it has already advanced against. That is why retail invoices carry a larger reserve and why a factor will ask for your deduction history. Clean shipping documentation, tight compliance with the retailer’s routing guide and prompt dispute of invalid deductions all improve your terms over time.
Factoring only works once an invoice exists, after the goods ship. If a large order needs materials or components you cannot pay for yet, purchase-order financing can pay the supplier against the confirmed order. When the finished goods ship and you invoice, the factoring facility pays off the purchase-order financing and releases the rest. Many manufacturers use the two together to take orders larger than their cash would otherwise allow.
Before funding, a factor usually confirms three things for each invoice: that there is a purchase order, that the goods were delivered (a signed bill of lading or delivery receipt), and that the customer has no reason to dispute it. It will also run a lien search, because an existing lender with a blanket lien on receivables has to agree before those receivables can be sold. If you have a bank line of credit, raise it early; it is the most common reason a manufacturing factoring setup takes longer than expected.
A bank line of credit is usually cheaper if you qualify, but it is sized to your financial statements and can be reduced when results dip. Asset-based lending borrows against receivables and inventory together and suits larger manufacturers with audited reporting. Factoring is the most accessible: it grows with your sales, depends mostly on your customers, and can be used by a young company whose statements would not support a bank line. For the machines themselves, see CNC machine financing and press brake financing.
Send an accounts receivable aging report, a customer list with typical order sizes, a few recent invoices with their purchase orders and delivery proof, and three months of business bank statements. For plant-wide strategy, see manufacturing financing and working capital for manufacturing, or apply once at invoice factoring to compare offers.
You ship an order and invoice your customer as usual, then sell the invoice to a factor, which advances 75 to 90 percent within a day or two. When the customer pays, the factor sends you the balance minus its fee.
Fees typically run about 1 to 3.5 percent per 30 days the invoice is outstanding. Large, creditworthy customers and a spread of accounts bring the fee down; retail deductions and customer concentration push it up.
Yes. Retailers pay reliably, but because they take deductions and chargebacks, factors usually advance less, often 75 to 85 percent, and hold a larger reserve until the invoice is paid in full.
Not directly, because factoring needs a delivered invoice. Purchase-order financing can pay suppliers for a confirmed order, and the factoring facility then takes over once the goods ship and are invoiced.
The bank has to release or subordinate its lien on the receivables before a factor can buy them. Raise it early, since it is the most common cause of delay in setting up manufacturing factoring.
Your customers’ credit matters more than yours. Factors still check for tax liens, existing liens and judgments, but a young manufacturer with strong customers can often factor when it could not get a bank line.
One application goes to 100+ funding partners, with no impact on your credit score. Send an aging report and we will come back with real advance rates and fees.
