Invoice Factoring vs a Business Line of Credit

When a business needs working capital, two options come up repeatedly: invoice factoring and a business line of credit. Both can solve cash flow problems, but they work very differently.

How Each Works

A business line of credit is revolving credit from a bank. You're approved for a maximum limit and can draw against it as needed, paying interest only on what you draw.

Invoice factoring is not a loan. You sell specific invoices to a factoring company and receive an advance—typically 80–95%—within 24 to 48 hours. When your customer pays, the factor remits the remaining balance minus a fee.

Qualification Requirements

Business line of credit: 600+ credit score, 2+ years in business, consistent revenue, often collateral. Approval takes 2–8 weeks.

Invoice factoring: Outstanding B2B/B2G invoices, creditworthy customers, basic business documentation. Approval in 24–72 hours.

Scalability

A line of credit is fixed at approval. If your business grows, you reapply. Factoring scales automatically—double your invoice volume and your factoring capacity doubles with it.

Which Should You Choose?

Choose a line of credit if: Your business is well-established with strong credit, you need funding beyond receivables, and you can wait weeks for approval.

Choose factoring if: You're newer or have limited credit, you need capital quickly, your customers are creditworthy businesses, and you want funding that scales with revenue.