What Is Invoice Factoring?

Invoice factoring is a way to get paid now for work you've already done. Instead of waiting weeks or months for your customer to pay an invoice, you sell that invoice to a factoring company, which advances you most of the value right away — typically up to 90%.

When your customer eventually pays, the factoring company remits the remaining balance to you, minus a transparent fee. You get immediate working capital; the factor takes on the wait. It's not a loan and it doesn't add debt to your balance sheet — you're simply accelerating money you've already earned.

Two numbers define a factoring deal: the advance rate (the percentage of the invoice you get up front, often 80–90%+) and the factoring fee (a small percentage of the invoice, charged for the service). Government receivables are considered low-risk because the payer is the federal government, so GovCon factoring fees are typically lower than commercial factoring — often in the 1–3% range.

There's no fixed monthly payment like a loan. The cost is the agreed fee on each invoice you choose to factor, quoted up front, so you always know what you're paying.

Factoring comes in two flavors. With recourse factoring, you're responsible if the invoice ultimately isn't paid. With non-recourse factoring, the factor absorbs the credit risk if the customer can't pay. Because the federal government is the payer in GovCon factoring, credit risk is minimal — which keeps terms favorable.

For government contractors, factoring is especially well-suited: underwriting focuses on the government's ability to pay (excellent) rather than your business credit, making it accessible to newer and fast-growing firms that a bank might decline.