Invoice factoring is one of the most underutilized products in a commercial lending broker's arsenal. Most brokers focus entirely on MCA and term loans — but there's a significant population of businesses that are perfectly fundable through factoring who don't qualify for revenue-based products. Adding factoring to your product mix lets you place deals you'd otherwise have to decline.
This guide explains how invoice factoring works from a broker's perspective, which businesses are ideal clients, and how to build factoring funder relationships.
What Is Invoice Factoring?
Invoice factoring is the sale of outstanding accounts receivable (invoices) to a factoring company at a discount. A business that invoices $100,000 to clients and waits 60 days to get paid can sell those invoices to a factor for $95,000–$97,000 today. The factor then collects the full $100,000 from the invoiced clients.
The key distinction from MCA: factoring is based on the creditworthiness of the business's customers (the invoice debtors), not the business owner's personal credit. A business with challenged personal credit can factor invoices to creditworthy corporations and get fully funded.
How Factoring Differs From MCA (For Broker Positioning)
| Factor | MCA | Invoice Factoring |
|---|---|---|
| Credit basis | Business owner FICO + revenue | Customer (debtor) creditworthiness |
| Repayment | Daily ACH from business bank account | Factor collects from your customers |
| Best for | B2C businesses with daily cash sales | B2B businesses with invoice-paying commercial clients |
| Approval timeline | 24–72 hours | 3–7 business days |
| Cost structure | Factor rate (1.10–1.50+) | Discount rate (1–5% per invoice or per 30 days) |
| Revenue requirement | Consistent bank deposits | Outstanding commercial invoices |
Best Client Profiles for Invoice Factoring
- Trucking companies with freight broker receivables (30–90 day payment cycles)
- Construction companies billing GCs or developers on AIA schedules
- Staffing agencies billing corporate clients
- Manufacturing companies with net-30 or net-60 purchase orders
- Cleaning and janitorial companies with commercial property management contracts
- Medical practices billing insurance carriers
- IT services and consulting firms with corporate clients
How to Identify Factoring Opportunities in Your Pipeline
The question to ask every B2B business in your pipeline: 'Do you invoice other businesses and wait for payment?' If yes, factoring is potentially a better fit than MCA. Follow-up questions: What's your average invoice amount? Who are your customers (businesses, government, individuals)? How long do you typically wait for payment?
Building Factoring Funder Relationships
Factoring companies are separate from MCA funders and have different ISO programs. Look for factoring companies that specialize in your target industries — transportation, construction, healthcare, and staffing all have dedicated factoring companies with deep industry expertise.
- Transportation/trucking factors: these are the most prolific and well-known factoring companies; most are actively recruiting trucking brokers
- Construction factors: understand AIA billing, lien waivers, and draw schedules
- Healthcare factors: specialize in medical billing receivables and insurance collections
- General commercial factors: handle mixed-industry B2B receivables
Adding 3–4 factoring funder relationships to your lender network can unlock 20–30% more fundable deals from your existing lead pipeline — because B2B businesses that are borderline for MCA may be ideal factoring clients.
Commission Structure for Factoring
Factoring commissions are typically structured as a percentage of the factoring volume — either a one-time referral fee ($500–$1,500 per account opened) or an ongoing override of 0.25–0.50% of monthly factored volume. On a trucking company factoring $150,000/month, an ongoing 0.25% override is $375/month — for a referral you made once, recurring indefinitely while the relationship is active.
Bottom Line
Invoice factoring is a natural add-on product for any commercial lending broker working with B2B businesses. It opens funding options for clients who might not qualify for MCA products, and the recurring commission structure rewards you indefinitely for accounts you open. Add 2–3 factoring funder relationships to your network and start asking the invoice question on every B2B deal.