Quick answer: A business line of credit is usually cheaper and more flexible if you qualify, because you borrow only what you need and pay interest only on what you draw. Invoice factoring can be the better fit when you have large invoices to creditworthy business customers but limited credit available, since approval depends mostly on your customers’ ability to pay.
How each option works
Invoice factoring: You sell unpaid invoices to a factoring company, which advances most of the invoice value (often 70%–90%) right away, collects from your customer, then pays you the remainder minus its fee.
Line of credit: A lender approves a credit limit. You draw funds when you need them, repay, and draw again. You pay interest only on the outstanding balance.
Side-by-side comparison
| Invoice factoring | Business line of credit | |
|---|---|---|
| Based on | Your customers’ credit and invoices | Your business revenue, cash flow and credit |
| Amount | Grows with your invoices | Fixed limit |
| Who collects from customers | Often the factoring company | You |
| Cost | Fee per invoice, often charged weekly or monthly until paid | Interest on what you draw, plus any fees |
| Customer visibility | Customers usually know | Private |
| Best for | B2B businesses with slow-paying but reliable customers | Most businesses with steady revenue |
When factoring makes sense
- Your customers are large companies or government agencies that pay slowly
- You are growing fast and invoices outpace your credit limit
- You don’t mind a third party contacting your customers
When a line of credit makes sense
- You want to keep customer relationships private
- Your needs vary month to month
- You want the lowest total cost
- You have 2+ years in business and steady revenue
Brookestone Funding lines of credit
Lines of credit from $10,000 to $2,000,000 with terms up to 36 months and rates starting at 8% for qualified businesses, typically set up in 1–3 days. Minimums: 2+ years in business, $30,000+ monthly revenue and a 600+ credit score.
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Frequently Asked Questions
Is invoice factoring more expensive than a line of credit?
Often, yes. Factoring fees add up the longer an invoice stays unpaid. A line of credit is usually cheaper for businesses that qualify.
Will my customers know if I factor invoices?
Usually. Most factoring companies notify your customers and collect payment directly. A line of credit stays private.
Can I use both factoring and a line of credit?
Sometimes, but many lenders restrict it because factoring gives another party a claim on your receivables. Ask before signing.
Which is faster, factoring or a line of credit?
Both can fund within days. Brookestone Funding typically sets up lines of credit in 1–3 days for qualified businesses.
Need financing? Brookestone Funding offers business term loans, lines of credit and SBA loans from $10,000 to $2,000,000, with same-day funding available for qualified businesses. We’re rated 4.5 on Trustpilot by more than 240 customers. Apply in minutes, see our business loan options, or call 212-258-0602.
