Accounts Receivable Financing: How a Facility Against Your Ledger Works and How to Qualify
A revolving facility secured by your receivables. Availability moves as you invoice and collect.
Soft credit pull only, no obligation
Rates, factor rates, fees and terms are set by the funding provider that makes your offer and are disclosed in that provider's agreement. Figures on this page are illustrative ranges from providers in our network, not offers. A receivables facility is documented as credit; the invoice-by-invoice sale is on the invoice factoring hub.
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At a glance
| Amount available | Recalculated from your aging report each period, depending on the funding provider |
|---|---|
| Advance rate | Commonly 70–90% of the eligible balance, depending on the funding provider |
| Structure | Revolving credit secured by the whole ledger; factoring, by contrast, sells single invoices |
| Speed | Slower to open than a single decision; then draws are routine, subject to provider approval and document turnaround |
| Collateral | Your receivables, with a UCC lien filed on them, a public record under UCC Article 9 |
| Cost expressed as | A factoring fee per invoice, or a charge on what is outstanding plus facility fees |
No fee is quoted on this page: no single network figure fits every ledger.
What is accounts receivable financing?
Definition
Accounts receivable financing is credit secured by your receivables book: you draw against the eligible part of the ledger, and the invoices stay yours.
It is a different structure from factoring, where each invoice is sold and the factoring company advances part of its value.
What else shares the name?
Factoring sells invoices; invoice financing pledges them while you collect; a facility lends against the eligible ledger.
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This page covers the facility. For the middle option, see invoice financing.
Why the ledger, not the invoice?
A facility asks how much of the whole book can be relied on, so no invoice waits for its own approval.
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Availability moves as you invoice and collect. The trade is scrutiny: reports, reconciliations and periodic audits.
Who collects the invoices?
On a facility, usually you do; on factoring, usually the factoring company, which your customer then pays.
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A facility is the quieter choice where an assignment notice would worry customers.
How a borrowing base is struck from your ledger
There is no fixed limit: the borrowing base is recalculated from your aging report each period, depending on the funding provider.
Availability follows
- Your eligible invoices
- Your customers' credit
- Concentration
- Dilution
How the borrowing base is struck: an example
The ledger
$500,000 of invoices still open on your receivables aging report.
The eligible base
Disputed, overdue and concentrated balances out: $400,000.
The availability
An advance rate of 80% applied to the eligible base: $320,000.
The reset
Report the ledger each period; the base and your draw move with it.
Illustrative example, not an offer. The funding provider sets the advance rate and eligibility rules in its agreement.
Two habits that protect availability
Run the aging report from your books, unedited.
Flag a disputed balance before the provider finds it.
Decisions from some providers the same day, depending on the provider.
Subject to provider approval and document turnaround.
How the cost of a receivables facility is expressed
Providers in our network price a facility on the balance drawn, plus the fees that keep it open; factoring is priced per invoice instead. Both are disclosed in the agreement.
A factoring fee per invoice
Charged per period an invoice is open, from the reserve.
Simple to price, invoice by invoiceA charge on what is outstanding
On a revolving facility, plus the fees that keep it running.
Reporting and audit costs add up
Facilities commonly add, depending on the funding provider
- Set-up or facility fee
- Minimum-usage charge
- Audit costs
- Termination charge
Each one belongs in the fee schedule.
Ask for the all-in cost of one full period, from ledger report to released reserve, and what it costs to leave.
See what an offer statesWhy reporting costs are underestimated
They buy a facility that does not inspect every invoice. Weigh them against factoring's per-invoice fees.
Who qualifies for receivables financing
There is no published minimum ledger size we can state: each provider sets its own floor. A personal guarantee is commonly required; see personal guarantees explained.
Meeting a provider's floor does not guarantee an offer.
What a provider reads in your aging report
The aging report is the underwriting file.
Your customers.
Their credit and payment record decide the file.
Concentration.
One or two big names fund far below the total.
Dilution.
Credit notes and returns lower the advance rate.
A report that reconciles.
It must match your ledger and bank statements.
How to apply for receivables financing
We check your options with a soft credit pull only, so looking does not change your score.
What you'll send
- three months of bank statementsfour in CA, NY, FL and GA with some providers
- A government ID
- An accounts receivable aging report, unedited
- An accounts payable aging report and your customer list
Before a facility opens, the provider also
- Checks each customer's credit
- Searches for an earlier lien
Worth asking before you sign
What does one full period cost, all in, and what does it cost to leave?
To read an offer with a specialist, talk to a funding advisor.
Apply once
about 5 minutesOne file reaches the providers whose guidelines fit your receivables.
Send the ledger
Complete months, all pages, no screenshots.
Review the file
A funding specialist reads concentration, dilution and any lien, and says plainly which product fits.
A facility opens more slowly than a single decision, subject to provider approval and document turnaround.
Compare the offers and sign
Each offer states:
- Advance rate
- Eligibility rules
- Concentration caps
- Fee schedule
- Reporting cycle
When a ledger facility fits, and when it does not
A large, steady book and records that reconcile.
| Ask yourself | Fits | Not for |
|---|---|---|
| Is your ledger large and steady? |
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| Do your books reconcile each period? |
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Is your ledger large and steady?
- Wholesalers, manufacturers and staffing firms on long net terms.
- A small or lumpy ledger, which does not carry the reporting costs.
Do your books reconcile each period?
- Reports straight from the accounting system.
- Books that cannot tie out, which will not survive the first audit.
Better fit elsewhere
- A smaller or younger bookUse insteadInvoice factoringinvoice by invoice, simpler to open
- A recurring, modest gapUse insteadBusiness line of creditwhich your customers never see
- One machine or vehicleUse insteadEquipment financingwhere the asset secures its own deal
Terms are set by the funding provider.
Compare receivables financing with the rest of factoring
The same invoices can be sold one at a time, pledged in batches or financed as a whole book.
- Invoice factoring overview
Sell single invoices to a factoring company, which advances part of each one and collects from your customer.
- Invoice financing
Draw against selected invoices while you keep collecting, without the reporting a whole-ledger facility needs.
Freight has its own page: invoice factoring for trucking and logistics companies.
Related financing
- business line of credit
Standby capital you draw only when you need it, then draw again.
- working capital financing
Cash for payroll, stock and the gaps between deposits and bills.
Where receivables financing is common
Long commercial terms are normal in wholesale and distribution, manufacturing, transportation and professional services.
Accounts receivable financing questions
In short
Accounts receivable financing is a revolving facility secured by your whole receivables book. The provider sets a borrowing base from your aging report, advances a percentage of the eligible balance, and availability moves as you invoice and collect. Unlike invoice factoring, no invoice is sold. Advance rates commonly run 70–90%, depending on the funding provider.
What is accounts receivable financing?
It is a revolving facility secured by the invoices your customers have not yet paid. The provider strikes a borrowing base from your aging report, applies an advance rate to the eligible balance, and availability moves with the ledger. The name is also used loosely for invoice factoring, which is a sale of invoices. Terms are set by the funding provider.
How is accounts receivable financing different from invoice factoring?
Factoring works invoice by invoice: each is sold or assigned, and the factoring company collects it. A receivables facility works on the ledger: the provider sets an eligible base from your aging report, advances a percentage of it, and you usually keep collecting. Factoring is simpler to open; a facility suits a larger, steadier book.
What is an accounts receivable aging report and why does it matter?
It lists every unpaid invoice by customer and by how long it has been outstanding. The facility is built on it: the provider reads it to decide which balances are eligible, how much rests on one customer, and whether invoices settle on your terms. Run it from your accounting system, unedited.
How much can I get against my receivables?
It is a calculation, not a limit: the provider removes the balances it will not fund and applies an advance rate to the rest. Two identical ledger totals can end up far apart, because eligibility does the work. The advance rate and the eligibility rules are stated in your agreement.
Is accounts receivable financing a loan?
A receivables facility is credit: the provider lends against your eligible ledger under a credit agreement, and draws are repaid as customers pay. Factoring, which is often sold under the same name, is a sale of invoices under a factoring agreement, priced with a factoring fee. Ask which an offer is before comparing cost.
What is concentration, and why does it reduce what I can draw?
Concentration is the share of your ledger owed by one customer. A provider caps how much of any one customer's balance counts towards the eligible base, so one default cannot take the facility with it. If one or two accounts dominate, expect availability well below your ledger total.
Does a receivables facility put a lien on my business?
A UCC lien is filed on your accounts receivable, and sometimes on inventory or as a blanket lien. It is a public filing, so other funders will see it, and anything already filed against your receivables has to be released or subordinated first. Your funding specialist checks your filings first.
Still have a question?
talk to a funding advisorPut your receivables to work: see which facility offers fit your ledger.
about 5 minutes, soft credit pull only · talk to a funding advisor