If cash is tied up in unpaid invoices, two common solutions are invoice factoring and a business line of credit. Both free up working capital, but they work differently.
At a glance
| Invoice Factoring | Line of Credit | |
|---|---|---|
| What it’s tied to | Your unpaid invoices (A/R) | A set credit limit |
| How you draw | Advance on invoices as you raise them | Draw and repay as needed |
| Qualification | Leans on your customers’ credit | Leans on your credit & financials |
| Scales with | Your sales / receivables | Your approved limit |
| Best for | B2B businesses with slow-paying customers | Flexible, revolving short-term needs |
How they differ
Security. Factoring advances specifically against your invoices, so approval leans on your customers’ creditworthiness. A line of credit is based more on your own credit and financials.
Scaling. Factoring grows automatically with your sales — more invoices, more available funding. A line of credit is capped at your approved limit until you renegotiate.
Cost & flexibility. A line of credit is often cheaper and highly flexible if you qualify. Factoring can be easier to access for B2B businesses and turns receivables into cash without waiting on customers.
When to choose each
- Choose factoring when you invoice other businesses on terms and cash is stuck in receivables — especially if your own credit is still building.
- Choose a line of credit when you qualify and want flexible, revolving access to funds for general short-term needs.
See our full guide to invoice factoring, or tell us what you need and we’ll help you choose.