Glossary · Funding
What is Invoice factoring
Definition
Selling your unpaid invoices to a funder at a discount for immediate cash. The funder advances most of the invoice value, then pays the balance on settlement.
Applies to: US and UK · Reviewed by James Doyle
In practice
Factoring advances typically run 85% to 95% of invoice value. The funder holds the remainder as a reserve and releases it, less fees, once the client pays.
Recourse factoring leaves the bad-debt risk with you. Non-recourse shifts approved credit risk to the funder and costs more. For staffing specifically, payroll funding is often the better fit because it solves the payroll timing problem, not just the receivable.
Related terms
Payroll funding
A facility that pays your contractors each week and is repaid when your client settles the invoice, removing the cash gap from the agency's balance sheet.
ReadAdvance rate
The percentage of an invoice a funder releases immediately. The remainder is held back as a reserve until the client pays.
ReadRecourse
Who carries the loss when a client does not pay. Under recourse funding the agency buys the debt back; under non-recourse the funder absorbs approved credit losses.
ReadWorking capital
The cash an agency must hold to pay contractors before clients pay invoices. It is the real startup cost of a contract staffing business.
Read
Put the theory to work.
Model your rates, costs and funding with the calculators built on our own 2025 data.