Spot factoring (single invoices)
Selling one unpaid invoice, or a few, to a factor for cash now, without signing up to sell it all your invoices. Useful for an occasional large invoice, but each deal is priced on its own.
- Secured on invoices
How it works
Spot factoring is factoring one invoice at a time. As with ordinary factoring, you sell the invoice (it is no longer yours), the factor pays you less than its face value, and your customer usually pays the factor. The difference is that you choose which invoice to sell and when, rather than agreeing to sell the factor all your invoices, or a set volume, over a period.
- You invoice a business customer on payment terms.
- You offer that invoice to a factor. It checks mainly your customer's credit, since your customer is the one who will pay it.
- If it accepts, it pays you for the invoice minus its charge, usually before the due date, and collects from your customer.
What to compare: the price for each invoice, any fees for checking the customer or setting up an account, and whether the deal is with recourse (you buy the invoice back if your customer does not pay) or without. State disclosure laws treat each single-invoice offer as its own deal, so in states that have them you get the dollar cost of that deal, and in California and New York an APR or estimated APR, before you sign.
No public body publishes typical prices or terms for single-invoice deals. Ask for the total cost in dollars, and compare it with what a line of credit or an ongoing factoring or receivables agreement would cost for the same invoice.
Upsides and downsides
Upsides
- You choose which invoices to sell and when, with no ongoing agreement
- The factor looks mostly at your customer's credit, so a young business can use it
- Cash in days rather than waiting for the customer to pay
Downsides
- Each deal is priced on its own, so check the cost of every one
- Your customer usually pays the factor, so they know you sold the invoice
- The factor can turn down an invoice if it does not trust the customer
Risks
- With recourse, you must pay the factor back if your customer does not pay
- A lender that already has a lien on your receivables may have to agree first, or the sale can breach your loan agreement
What it costs
- How it is priced
- A discount or fee on each invoice you sell, set by the factor for that deal
- Costs that are easy to miss
- Fees for checking your customer or opening an account, on top of the discount
- If the deal is with recourse, the cost of buying the invoice back if your customer does not pay
Up to the value of the invoice the factor buys, less its charge.
Have an offer? Cost of factoring an invoice: work out the cost of an invoice
Does it fit?
Could fit when
- You have one or a few large invoices to business customers and need the cash before they pay
- Your customers take more than 60 days to pay
Unlikely to fit when
- Your customers pay upfront or by card rather than on invoice
- Your unpaid invoices are worth less than the amount you need
- You need cash against most of your invoices month after month, where an ongoing agreement may cost less per invoice
Who can use it
- Business types: Sole proprietorship, Partnership, LLC, S corporation, C corporation, Benefit corporation, Cooperative, Nonprofit
- Needs sales (revenue)
- Only for businesses that sell to other businesses
- An unpaid invoice to a business or government customer whose credit the factor accepts
- No earlier lien on that invoice, or the lienholder's agreement to the sale
Am I ready?
What a provider is likely to ask for. Tick what you have. Your ticks stay in this browser and nothing is stored. Checklist for all asset-based and specialist lending
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- The invoice and proof of delivery
- Customer details
- Liens on file checked
Regulation and protections
Regulators: Federal Trade Commission (FTC); State lending and financial regulators.
Who runs it: Private providers, nationwide.
Most factors are not regulated as banks. Federal Truth in Lending rules do not apply to business finance. The FTC Act bans unfair or deceptive practices. Several states require factors to disclose their costs before you sign; see below.
Rules that differ by state
- California: A factor that is not a bank or credit union must give you a disclosure before you sign an offer of $500,000 or less, showing the funds you get, the total dollar cost, the term, the payments, the prepayment rules and an APR or estimated APR, and must get your signature on it. (California Financial Code, Division 9.5: Commercial Financing Disclosures (sections 22800 to 22807))
- New York: A factor that is not a bank or other financial institution must disclose, when it makes a specific offer of $2.5 million or less, the price it pays for your invoice, the finance charge and an estimated APR calculated under federal Truth in Lending rules. Factors that make five or fewer deals a year in New York are not covered. (New York Financial Services Law section 806: factoring transaction disclosures; New York Financial Services Law section 802: exemptions)
- Utah, Florida, Georgia, Kansas, Missouri: A factor that makes more than five commercial financing deals a year in the state, and is not a bank or credit union, must disclose before or when you sign the funds you get, the total you will pay, the total dollar cost, the payments and any prepayment costs, for deals of up to $1 million in Utah and $500,000 in the other states. No APR is required. Utah also requires the factor to register with the state. (Utah Code Title 7, Chapter 27: Commercial Financing Registration and Disclosure Act; Florida Statutes, chapter 559, part XIII: Florida Commercial Financing Disclosure Law (559.961 to 559.9615); Georgia SB 90 (2023), as passed (Act 78): commercial financing disclosures, O.C.G.A. 10-1-393.18; Kansas Statutes 75-784: required disclosures (2024); Revised Statutes of Missouri 427.300: Commercial Financing Disclosure Law)
- Texas: When a business sells its invoices at a discount, Texas law says the discount is not interest, and an agreement that calls the deal a purchase settles that it is not a loan, so the state's interest ceilings do not apply to it. (Texas Finance Code chapter 306: commercial transactions)
- Tennessee: When one business sells its invoices or other accounts to another at a discount or for a fee, Tennessee law says the discount or fee is not interest, even if the seller has to buy back invoices that go unpaid, so the state's interest ceilings do not apply to it. (Tennessee Department of Financial Institutions: rates of interest (the maximum effective formula rate, announced each week); Tennessee Code Unannotated, free public access (LexisNexis), current through the 2026 regular session: section 47-14-102(1) and (8))
Types of provider: Independent factoring companies; Online invoice finance platforms.
Also consider
What has changed
No changes since this page was published. It was last checked against its sources on October 20, 2026.
Sources
- OCC Comptroller's Handbook: Accounts Receivable and Inventory Financing (factoring) · checked October 20, 2026
- New York Financial Services Law section 806: factoring transaction disclosures (a specific offer for a factoring transaction) · checked October 17, 2026
- 12 CFR 1026.3 (Regulation Z): exempt transactions, including business credit · checked October 17, 2026
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