How Does Invoice Factoring Work? A Guide for B2B Businesses

Unpaid invoices are often one of the biggest challenges B2B businesses face—especially when customers operate on Net 30, 60, or even 90-day terms. While you wait for payments, your own obligations—payroll, suppliers, inventory—keep piling up.

That’s where invoice factoring comes in. It’s a financing solution that converts your accounts receivable into immediate working capital, helping you bridge cash flow gaps and keep your operations running smoothly.

As your trusted financial partner, Finmed Capital helps you navigate the options and connect with the right funding partner—ensuring better rates, faster approvals, and a smooth process that lets you focus on what matters most: growth.

What Is Invoice Factoring?

Invoice factoring allows businesses to sell their unpaid invoices to a financing company (called a “factor”) in exchange for a cash advance—typically 80–90% of the invoice value. Once your client pays the invoice, the factor sends you the remaining balance minus a small fee.

Unlike a traditional loan, you’re not borrowing money—you’re unlocking the value of work you’ve already completed.

How Does Invoice Factoring Work?

A Step-by-Step Breakdown

Deliver Your Product or Service
You complete the order for your client and issue an invoice, often with Net 30, 60, or 90-day terms.
Connect with a Financial Partner
Instead of researching dozens of lenders or factoring companies on your own, Finmed Capital assesses your specific needs and matches you with the most suitable factoring partner in our network.
Get an Advance on Your Invoice
The factoring partner advances 80–90% of the invoice value, typically within 24–48 hours.
The Factor Collects from Your Customer
Your client pays the invoice directly to the factor at the end of the payment term.
Receive the Remaining Balance (Minus Fees)
Once payment is received, you get the rest of the invoice value minus a small fee (often between 1–3%).

Real-World Case Study: Ontario-Based Medical Device Distributor

An Ontario-based medical device distributor had over $120,000 in unpaid invoices from hospital clients, all with 60-day terms. This created a significant cash flow strain, making it difficult to replenish inventory and fulfill a growing pipeline of purchase orders.

They turned to Finmed Capital for help. Within 48 hours, we secured a factoring partner offering:

85% advance rate
Competitive fee structure
Simple approval process

They received $102,000 upfront, allowing them to:
✅ Reinvest in inventory
✅ Fulfill a $75,000 new order
✅ Cover operational expenses without touching their credit lines

When the customer paid 60 days later, they received the remaining balance ($16,800) minus a minimal fee.

💡 This is a perfect example of how invoice factoring can unlock growth without adding debt or delaying operations.

Why B2B Companies Use Invoice Factoring

Speed: Receive funding in as little as 24 hours
No Debt: You’re not taking out a loan, so there’s no principal or interest to repay
Flexibility: Ideal for businesses with unpredictable cash cycles or seasonal demand
Credit-Light: Approval is based more on your customer’s creditworthiness than yours

Common industries that benefit from factoring include:
📦 Manufacturing
🚚 Logistics & Freight
💉 Medical Supplies
🧪 Pharmaceuticals
🏗️ Construction & Equipment Rental

Why Work with a Trusted Financial Partner Instead of Going Direct?

Partnering with a factoring company directly may seem simpler—but it often leads to generic offers, higher fees, or time-consuming processes.

Finmed Capital acts as your trusted advisor, with access to over 200 financing partners across North America. Here’s what we bring to the table:

🛠️ Custom Matching

We evaluate your business, industry, and cash flow goals, then connect you with a partner tailored to your needs.

💬 Better Terms & Negotiation

Thanks to our established relationships, we can often secure more competitive terms than you’d get on your own.

⏳ Save Time

We manage the paperwork, negotiate rates, and facilitate approvals so you can stay focused on running your business.

🧠 Industry Insight

We understand the unique financing challenges of your industry and can recommend the right solutions—not just the fastest ones.

Is Invoice Factoring Right for You?

This financing option makes sense for businesses that:

Operate on B2B terms (not retail or direct-to-consumer)
Have customers with strong payment histories
Need quick cash to support growth, bridge gaps, or cover expenses
Want non-dilutive, non-debt solutions

However, if you work with slow-paying or high-risk clients, factoring may come with higher fees—or may not be the ideal fit.

At Finmed Capital, we help you evaluate all your options, including working capital loans, asset-based lending, and equipment refinancing, so you can choose what fits your roadmap.

Final Thoughts

Invoice factoring is more than just a way to survive between pay cycles—it’s a strategic financing tool that can help your business grow faster, stay leaner, and avoid unnecessary debt.

If you’ve ever thought: