Invoice Factoring vs Line of Credit: Which Funds Working Capital Better?
If you invoice B2B clients on net-30, net-60, or net-90 terms, you have two main working-capital options. They look similar from the outside but operate on completely different mechanics.
Start an applicationBy Chady Zahri, Chief Executive Officer · Updated April 1, 2026
Short answer
Use invoice factoring when receivables are your biggest asset and you cannot wait 30–90 days to get paid. Use a line of credit when your business has strong cash flow and good credit, and you need flexible draw access. Factoring scales with receivables; an LOC scales with credit profile.
How factoring works
Factoring is the sale of receivables. A factor advances 80–95% of an invoice value immediately, then collects from your client and remits the balance minus a discount fee. No new debt on the balance sheet. Approval depends on your clients' creditworthiness, not yours.
How a line of credit works
A line of credit is bank-style debt — a revolving facility you draw and repay against. It does not depend on specific receivables. Approval depends on your business credit, revenue, and bank-statement health.
Best fit by business type
Factoring fits trucking, freight, staffing, manufacturing, construction sub-contractors, and any B2B business with concentrated receivables and slow-pay clients. LOCs fit retail, e-commerce, professional services, and businesses with strong credit and diversified revenue.
Cost comparison
Factoring fees are typically 1.5–4% per invoice month. LOC interest is APR-based on drawn balance. For businesses with consistent net-60 receivables, factoring often costs less than chasing collections + LOC interest combined. For businesses with short cash conversion cycles, an LOC is cheaper.
How Voxen decides
Voxen looks at your customer concentration, average days sales outstanding (DSO), receivables size, and credit profile. We then recommend factoring, an LOC, or both layered together. We do not push factoring on businesses that don't need it.