Accounts Receivable Loans: How to Borrow Against What You Are Owed

How Borrowing Against Receivables Works

Every accounts receivable loan starts from the same fact: a business that invoices on terms is extending credit to its customers. The lender steps in between the invoice date and the payment date. You submit invoices, the lender checks that they are real, unpaid, not too old and owed by creditworthy customers, and then advances a share of their value. When the customer pays, the lender keeps what it is owed plus its fee and sends you the rest.

Three numbers decide how much you get and what it costs:

• Advance rate. The share of invoice value paid up front, usually 70% to 90%. Clean invoices to large, slow-but-reliable payers sit at the top of that range; invoices to small or new customers sit lower.
• Fee or rate. Factoring and invoice financing charge a fee per 30 days the invoice stays open, commonly 1% to 5% of the invoice value. A/R lines of credit charge interest on the drawn balance, usually a spread over Prime (7.00% in October 2026) plus a facility fee.
• Reserve. The part of the invoice held back until the customer pays, less the fee. On a $50,000 invoice at an 85% advance, $42,500 arrives now and the remaining $7,500 minus the fee arrives when the customer pays.

Because repayment comes from your customers, underwriting looks at their payment history as much as yours. That is why receivables financing is often available to businesses that a bank would turn down on credit score alone.

The Three Ways to Borrow Against Receivables

The names overlap in practice. Many funders call all three “accounts receivable financing,” and the contract, not the label, tells you whether you are borrowing against invoices or selling them. The question to ask is simple: who collects the invoice, and who carries the loss if the customer never pays?

How Much Can You Borrow Against Receivables?

The ceiling is set by your eligible receivables, not by your revenue or credit score. Eligible usually means invoices that are:

• Owed by another business or a government agency (consumer receivables rarely qualify)
• Less than 60 to 90 days old, with no disputes or partial payments
• Not already pledged to another lender under a UCC filing
• Spread across customers, so no single payer is more than about a third of the total

Multiply eligible invoices by the advance rate and you have your borrowing base. A distributor carrying $400,000 in eligible invoices at an 80% advance can draw up to about $320,000. Through RAN Funding’s lender network, receivables facilities run from around $20,000 to $5 million, both outside the SBA and through SBA-backed structures. Facilities grow with your invoicing; a line sized at $200,000 in spring can be re-sized in the fall if sales have doubled.

What an Accounts Receivable Loan Costs

Receivables financing is priced on time. The longer your customers take to pay, the more it costs. A worked example at published ranges:

Compared on the same $100,000: a bank line at Prime + 3% (10.00% APR) drawn for 45 days costs about $1,250 in interest, but needs two years of financials and often collateral beyond the invoices; a 12-month short-term loan would cost several times more but is not tied to any one invoice. The right comparison is cost against the margin on the work. A 3% fee on a 25% margin job is affordable; on a 5% margin job it is not, and a line of credit or supplier terms are the better tool.

Watch for the fees that do not show in the headline rate: application and due-diligence fees, monthly minimums, lockbox charges, termination fees on long contracts and an extra charge when an invoice runs past 90 days.

Who Qualifies for an Accounts Receivable Loan

Because the invoices are the collateral, the bar on the business itself is lower than for a term loan, but it is not zero. Most funders in our network look for:

• B2B or B2G invoicing with payment terms of 30 to 90 days
• At least 6 to 12 months in business; 12 months opens the better-priced facilities
• Monthly invoicing of roughly $20,000 or more, with a spread of customers
• Customers with a reasonable payment record; the funder will check them
• No existing lien on the receivables, or a lender willing to subordinate
• Clean recent bank statements: no mounting NSFs or unexplained drops in deposits

Owner credit matters less than on other products. Files at 550 to 600 FICO are funded regularly when the customers are strong. What stops a file is unverifiable invoices, a single customer that is most of the book, or receivables already pledged elsewhere.

A/R Loan vs Line of Credit vs Short-Term Loan

Owners usually arrive at receivables financing after being quoted something else. The quickest way to choose:

• Choose an A/R loan or factoring when the cash gap is caused by slow-paying customers and your margins can absorb a fee of a few percent per month.
• Choose a business line of credit when you want a reusable buffer, your credit and time in business support bank or online pricing, and the gap is not tied to specific invoices.
• Choose a short-term loan or working capital funding when you need a lump sum for something other than waiting on invoices, such as inventory, a hire or an equipment deposit.

Many established businesses run two at once: an A/R line for the receivables cycle and a small working capital facility for everything else. A specialist can show you the all-in cost of each combination before you commit.

See what your business qualifies for

How to Apply Through RAN Funding

1. Apply once online. The form takes about five minutes and uses a soft credit pull.
2. Send your three most recent business bank statements (four in some states) and an aging report or list of open invoices with customer names and amounts.
3. A specialist reviews the file the same day and presents it to the receivables funders in the network whose criteria fit, not to a list of a hundred.
4. Compare the approvals side by side: advance rate, fee, term, recourse and any minimums, with the total cost on your actual invoices.
5. Choose, sign, and fund. First funding on a new facility usually takes 3 to 10 business days once customer verification is done; later draws are faster.

RAN Funding is a business financing broker, not a lender. The funding partner you choose sets the terms, and RAN Funding is paid by that partner, not by you.

Common Questions