Equipment Financing vs. Invoice Factoring: Compare Business Funding
Equipment financing vs. invoice factoring — asset purchase financing compared to receivables acceleration for B2B businesses.
Equipment Financing: Equipment financing uses the purchased equipment as collateral, making it one of the most accessible forms of business funding for asset-heavy industries. Invoice Factoring: Invoice factoring converts outstanding B2B invoices into immediate working capital — the factor advances a percentage and collects from your customers.
Equipment Financing vs. Invoice Factoring — side by side
| Equipment Financing | Invoice Factoring | |
|---|---|---|
| Typical amount | $5,000 – $5,000,000 | $10,000 – $5,000,000 |
| Typical term | 2 – 7 years | 30 – 90 days per invoice |
| Rate | 6% – 24% APR | 1% – 5% per 30 days |
| Minimum time in business | 1 year | 6 months |
| Minimum credit score | 600+ | No minimum (based on your customers) |
Which is right for your business?
- Equipment Financing tends to fit best when you need machinery or vehicles.
- Invoice Factoring tends to fit best when you need payroll or supplier payments.
Frequently asked questions
Can I use factoring proceeds to fund an equipment purchase?
Yes — factoring converts invoices to cash that can be used for any purpose, including an equipment down payment. For larger purchases, dedicated equipment financing is more cost-effective than factoring repeatedly to accumulate capital.
