Invoice Factoring vs. SBA Loans: Compare Business Funding
Invoice factoring vs. SBA loans — fast receivables acceleration compared to long-term government-backed financing.
Invoice Factoring: Invoice factoring converts outstanding B2B invoices into immediate working capital — the factor advances a percentage and collects from your customers. SBA Loan: SBA 7(a) and 504 loans are government-backed programs offering some of the lowest rates and longest terms available for qualifying small businesses.
Invoice Factoring vs. SBA Loan — side by side
| Invoice Factoring | SBA Loan | |
|---|---|---|
| Typical amount | $10,000 – $5,000,000 | $50,000 – $5,000,000 |
| Typical term | 30 – 90 days per invoice | 5 – 25 years |
| Rate | 1% – 5% per 30 days | Prime + 2.25% – Prime + 4.75% |
| Minimum time in business | 6 months | 2 years |
| Minimum credit score | No minimum (based on your customers) | 650+ |
Which is right for your business?
- Invoice Factoring tends to fit best when you need payroll or supplier payments.
- SBA Loan tends to fit best when you need business acquisition or real estate purchase.
Frequently asked questions
Can an SBA loan replace factoring for a growing B2B business?
An SBA working capital line of credit can serve a similar function at lower cost for businesses that qualify. The trade-off is the 30–90 day approval process and the SBA's eligibility requirements. Businesses should pursue SBA financing when they qualify and use factoring as a bridge or complement.
