Receivables, factoring and sales-based finance
50 answers. Written by the celerfunding.com editorial team from official sources. Each answer shows where it applies and when its sources were read.
What is invoice factoring and is it the same as a loan?
Factoring is the sale of your unpaid invoices to a third party, not a loan in BDC's description. BDC defines it as selling accounts receivable to a third party that collects the money owed and charges you for the service.
The business gets cash now instead of waiting for customers to pay. In BDC's example, the factoring company advances part of the invoice value, may hold back a percentage, collects from the customer, then releases the balance minus its discount.
BDC contrasts it with purchase order financing: the latter is a loan, whereas factoring is not. Contract terms vary, so read how your agreement is written and who bears the risk of non-payment.
Costs can be significant. Nothing here predicts approval or pricing.
Before signing, ask for all fees in writing, compare with a line of credit, and consider independent legal or accounting advice.
Next: Business funding
Related: Who collects from my customers if I factor invoices?
Sources (read 2026-11-01): BDC glossary: Factoring
What should I check before accepting a merchant cash advance?
Get the key terms in writing and check them against what you are told. A merchant cash advance usually gives money now in exchange for a larger repayment, collected by automatic withdrawals from your business account.
The FTC says these are often marketed to businesses that do not qualify for bank loans. In a case against two providers, it alleged withdrawals continued after full repayment, that products were described as having no collateral or personal guarantee when they did, and that large fees cut the money received. These are allegations, not findings.
Our suggestion, based on those concerns (not an FTC instruction): confirm in writing whether collateral or a personal guarantee is required, compare the amount promised with the amount deposited, ask about fees taken upfront, and watch your account to confirm withdrawals stop when the agreed total is reached.
MCAs are not the same as loans or invoice factoring, and rules vary. Consider independent legal or financial advice before signing.
Next: Funding answers
Sources (read 2026-11-01): Small businesses targeted with unauthorized withdrawals (FTC consumer alert, Aug 2020)
Who collects from my customers if I factor invoices?
In most cases the factoring company collects, so your customer pays it directly. BDC says this is one of the main advantages for businesses with little collection capacity. It is not always the case.
BDC notes other models. A factoring company may instead charge a fee for taking on the risk of non-payment, while you keep collecting your own receivables.
Who collects and who bears the loss if a customer does not pay are separate points that vary by contract. A contract may also require the business to buy back unpaid invoices, though that is not described in BDC's page.
Because customers may be told to pay someone else, think about how that will affect the relationship.
Nothing here predicts approval. Before signing, ask who collects, who is notified, and who bears non-payment risk, and get the answers in the contract.
Next: Business funding
Related: What is invoice factoring and is it the same as a loan?
Sources (read 2026-11-01): BDC glossary: Factoring
What fees can a factoring arrangement include?
A factoring arrangement can include more than one charge. BDC lists the factoring rate, which is a percentage of invoice value, plus other fees such as setup, monthly minimums and service charges. It also lists the advance rate, which is the percentage of the invoice value paid to you up front, and flat-fee structures.
BDC says the main disadvantage of factoring can be cost, which can be significant if the factor thinks customers may not pay. It advises reviewing the advance and factoring fees and other costs before agreeing, and weighing them against collecting internally.
The costs depend on your credit and your customers', the amount of receivables and industry risk. Offers differ, so compare them like for like.
Nothing here predicts a price or approval.
Ask each provider for a full written fee schedule and an example showing what you would receive on a sample invoice.
Next: Business funding
Related: What is invoice factoring and is it the same as a loan?
Sources (read 2026-11-01): BDC glossary: Factoring
Can I factor just one customer or a few invoices?
Often yes, depending on the provider. BDC says a business may factor one or more invoices, one or more clients, a combination, or all its receivables.
BDC gives an example of a company with one very slow-paying new client that factors only that client and keeps collecting from everyone else itself. It also says a business may factor for a specific purpose such as meeting payroll through an advance on outstanding invoices.
Providers set their own terms, and some may require minimum volumes or a fuller commitment. Check this in the contract.
Nothing here predicts approval or pricing.
Ask any provider whether it allows selective factoring, any minimum monthly volume or fee, and how to end the arrangement.
Next: Business funding
Related: What is invoice factoring and is it the same as a loan?
Sources (read 2026-11-01): BDC glossary: Factoring
What do factoring companies look at when they price an offer?
They mainly look at the risk of the transaction. BDC says the factoring firm sets its rates after reviewing the credit quality of your company and your customers, the invoice amount and the industry's risk profile.
That is why a strong customer can matter more than your own credit in this type of deal, though BDC does not rank the factors. Terms and conditions differ by provider, so BDC advises comparing options.
The advance and factoring rates and fees all vary with those risk factors.
BDC also says costs can be significant if the factor believes customers may not pay.
Nothing here predicts approval or an exact rate.
Before applying, gather your invoice list, customer names and payment history, and ask providers what they need and how they will decide.
Next: Business funding
Related: What fees can a factoring arrangement include?
Sources (read 2026-11-01): BDC glossary: Factoring
How does factoring compare with a line of credit or purchase order financing?
They solve different timing gaps. BDC describes a line of credit as a short-term loan up to a preset amount, generally secured by inventory and accounts receivable, and calls it the most popular product for short-term needs.
Factoring sells invoices after the customer has received the goods. BDC contrasts it with purchase order financing, which is a loan, typically secured by the purchase order, granted when the order is signed and repaid when the customer pays.
BDC adds that factoring is less common in North America, where businesses lean on credit lines. It says factoring can help manage debt ratios compared with credit lines.
Costs, risk and who deals with your customers differ. Nothing here predicts approval.
Match the product to when your cash gap occurs, then compare total cost and contract terms.
Next: Compare funding options
Related: What is invoice factoring and is it the same as a loan?
Sources (read 2026-11-01): BDC glossary: Factoring
What kinds of businesses use factoring, and when does it make sense?
Any business can use it, but BDC says factoring is especially helpful for manufacturers and others that spend up front and then wait on slow-paying customers.
BDC gives uses such as managing cash flow for seasonal or project-based companies or firms relying on a few key clients, funding raw materials for new orders, outsourcing collection when staff are limited, and reducing collection risk.
Its example is a manufacturer with 60-day customers and cash-on-delivery suppliers, which can face a gap of about 120 days.
BDC cautions that there has to be a business case. Compare all the fees with the benefit of collecting yourself, because the cost can be significant.
Nothing here predicts approval.
Calculate your cash gap in days, price a sample invoice and ask a provider for a written quote.
Next: Business funding
Related: What is invoice factoring and is it the same as a loan?
Sources (read 2026-11-01): BDC glossary: Factoring
Can I borrow against my receivables instead of selling them?
Yes, a few facilities lend against receivables instead of buying them. SBA's 7(a) Working Capital Pilot offers monitored lines of credit and mentions borrowing against accounts receivable or inventory as a use.
SBA lists a maximum of $5 million, 60-month maturity, at least one year of operating history and the ability to produce financial statements and receivables and payables agings. The guarantee is 85% for loans of $150,000 or less and 75% above that, with rate caps set by loan size.
This is an SBA pilot, so check current status with a lender. BDC also says a line of credit is generally secured by inventory and accounts receivable.
A loan secured by receivables is different from selling them: it stays a debt you repay.
Nothing here predicts approval.
Use SBA Lender Match or ask your bank for its receivables-based options.
Next: SBA 7(a) loans
Related: How does factoring compare with a line of credit or purchase order financing?
Sources (read 2026-11-01): BDC glossary: Factoring; SBA lending
Does the Canadian criminal interest rate apply to business financing?
Sometimes. Canada's criminal interest rate is 35% APR in the Criminal Code, but regulations exempt many commercial loans.
The Criminal Code defines the criminal rate as an annual percentage rate above 35% on the credit advanced, and counts fees and charges as interest. Under the Criminal Interest Rate Regulations, commercial credit is exempt from that rate where the borrower is not a natural person and the borrowing is for a business purpose, with two tiers: more than $10,000 up to $500,000 can be charged up to 48% APR, and more than $500,000 has no cap under the exemption.
Loans of $10,000 or less, or to individuals such as sole proprietors, may fall under the 35% cap.
How this applies to factoring or advances depends on whether the deal is credit. That is a legal question. Get Canadian legal advice.
Next: Canada funding resources
Related: What is invoice factoring and is it the same as a loan?
Sources (read 2026-11-01): Criminal Code section 347 (criminal interest rate); Criminal Interest Rate Regulations (Canada Gazette Part II, 2024)
Do any US state rules require disclosure of factoring or advance costs?
Yes, in some states. California's commercial financing disclosure regulations took effect on December 9, 2022 and cover commercial factoring and merchant cash advances among other products.
California's financial regulator says providers must disclose the funding amount, an annual percentage rate, payment amount where applicable, the term, prepayment details and, for products with no monthly payment, an estimated average monthly cost.
Other states have their own laws, and thresholds, exemptions and covered products differ. This record only confirms California, from the regulator's announcement. The rules may have been amended.
A disclosure does not mean a deal is a good one or that it is approved or endorsed.
If you receive an offer, ask for the written disclosure and compare it with the contract. Consider legal advice, especially for a larger deal.
Next: United States funding resources
Related: What should I check before accepting a merchant cash advance?
Sources (read 2026-11-01): DFPI commercial financing disclosure regulations effective Dec 9, 2022
Can credit insurance help me get financing for receivables?
It can in some cases. Export Development Canada says its trade credit insurance protects against non-payment by international buyers, so you can keep steady revenue if a customer does not pay.
EDC says depending on the policy it may also cover certain political risks, subject to its assessment and policy terms. Its page says lenders take on less risk on insured receivables, which can improve access to financing and help fund larger deals.
This is insurance, not a loan or a grant. It carries premiums and terms, and EDC decides coverage. It is aimed at businesses selling abroad.
Nothing here predicts approval or a lender's reaction.
If you export, ask EDC or your lender whether insured receivables could be used in your financing, and what the policy would cost and cover.
Next: International funding
Sources (read 2026-11-01): EDC trade credit insurance
Will my customers know I am using factoring?
Often yes. In typical factoring the customer pays the factoring company, so the customer learns of the arrangement. BDC says this is the usual case but not the only model.
A BDC specialist notes that with factoring it becomes clear to suppliers and clients that the business needs a lender's support to fill an order. BDC makes this point in explaining why its purchase order financing leaves collections with the business.
Some arrangements let you keep collecting yourself, but they may bring other terms or costs. Check the contract for notification, who customers pay, and what is said to them.
Nothing here predicts approval.
Before signing, decide how your key customers are likely to react, and ask providers whether they offer arrangements where you stay in contact with customers.
Next: Business funding
Related: Who collects from my customers if I factor invoices?
Sources (read 2026-11-01): BDC glossary: Factoring; BDC: Purchase order financing
What is the difference between recourse and non-recourse factoring?
Recourse means you stay on the hook if a customer does not pay. Non-recourse means the buyer of the invoice takes that loss risk. The contract decides which applies, so read it closely.
BDC notes that some factoring arrangements charge a fee for taking on the risk of non-payment, which is a sign the risk allocation is priced into the deal. US commercial law adds a point: for a true sale of accounts, UCC section 9-608 says the seller is not entitled to any surplus and the obligor is not liable for any deficiency when collections are applied. How a given contract treats unpaid invoices, chargebacks and buy-back duties can still differ from that default.
Before signing, ask in writing: which invoices are covered, what counts as non-payment (for example insolvency only, or also slow payment), and whether you must repurchase disputed invoices. A lawyer can confirm how the terms work in your province or state. You can send CELER an enquiry, but this is information only.
Next: Business funding
Related: What is invoice factoring and is it the same as a loan?; Who collects from my customers if I factor invoices?
Sources (read 2026-11-01): BDC glossary: Factoring; UCC 9-608: application of collection proceeds
If two financiers claim my receivables, who gets paid first?
Usually the financier that filed or perfected first, if both are perfected. Under UCC section 9-322(a), conflicting perfected security interests in the same collateral rank by the earlier of the time a filing covering the collateral is first made or the interest is first perfected, so long as there is no gap with neither filing nor perfection.
A perfected interest also beats an unperfected one. If both are unperfected, the first to attach wins.
There are special exceptions in other sections, and a written agreement between the two financiers can change the order.
In practice this is why a second lender or factor often searches your state's UCC records first and may ask for a payoff or a subordination agreement before funding.
This describes the US model rule only. Canadian provinces use their own personal property security laws. Check which lien is already filed before you promise the same invoices to anyone, and ask a lawyer how it applies to your deal.
Next: Business funding
Related: What is a UCC lien and how does it affect my receivables?; Is a sale of receivables treated like a secured loan under US commercial law?
Sources (read 2026-11-01): UCC 9-322 Priorities among conflicting security interests
Is a sale of receivables treated like a secured loan under US commercial law?
Article 9 of the Uniform Commercial Code covers both: it applies to secured loans and also to a sale of accounts. Section 9-109 puts a sale of accounts, chattel paper, payment intangibles or promissory notes inside its scope, with carve-outs such as a sale made as part of selling the whole business or an assignment made only for collection.
That matters for lien filings. A buyer of your invoices will usually file a financing statement to protect its position, which can show up on public searches, as if it were a lender.
Section 9-318 adds that a seller of an account does not keep a legal or equitable interest in it, with a narrow exception while the buyer's interest is unperfected.
Whether a particular deal is a true sale or a disguised loan depends on its terms and state law, not on its label. Ask a lawyer licensed in your state. In Canada, provincial personal property security laws apply instead, which this answer does not cover.
Next: US funding resources
Related: What is invoice factoring and is it the same as a loan?; What is a UCC lien and how does it affect my receivables?
Sources (read 2026-11-01): UCC 9-109: scope of Article 9; UCC 9-318: no interest retained in right to payment sold
How do I compare a factoring or merchant cash advance offer with a loan?
Compare the total dollars you receive against the total dollars you must repay, then the timing of payments. Florida's disclosure law gives a useful checklist: the total funds provided, the amount actually disbursed after fees or payoffs, the total to be paid back, and the total dollar cost, which is the difference between funds provided and the amount repaid.
Also ask how often payments are taken and whether they vary.
Annual percentage rates are harder, because many advances repay as a share of sales. California's regulator requires providers covered by its rules, including commercial factoring and merchant cash advances, to disclose an estimated annual percentage rate and, for products with no monthly payment, an average monthly cost. Those are estimates, not guarantees.
Put the same questions to every offer, including your bank's loan quote, and write the answers side by side. Rules differ by state and many deals are outside them, so do not assume a disclosure will be given. You can send CELER an enquiry, but this is information, not advice.
Next: Funding guides
Related: Do any US state rules require disclosure of factoring or advance costs?; What fees can a factoring arrangement include?
Sources (read 2026-11-01): Florida Statutes 559.9613 Disclosures; DFPI commercial financing disclosure regulations effective Dec 9, 2022
Can a lender file a UCC lien against my business without my permission?
Generally no. Under UCC section 9-509, a person may file an initial financing statement only if the debtor has authorized the filing in an authenticated record. Signing a security agreement counts as authorization to file a statement covering the collateral described in that agreement, and proceeds of that collateral.
So a filing that matches a contract you signed is normally authorized, even if you did not see the filing itself. A filing that goes beyond what you agreed to, or that was made when you signed nothing, may be wrongful.
If you think a filing is wrong, first ask the filer in writing to correct or terminate it, and keep your signed documents. A separate record, called an information statement, can also be filed about an inaccurate or wrongful record.
This is the US model rule. Ask a lawyer about your state, and check Canadian rules separately.
Next: Business funding
Related: What is a UCC lien and how does it affect my receivables?; How do I get a UCC lien removed after I repay a financing?
Sources (read 2026-11-01): UCC 9-509 Persons entitled to file a record
What must a provider tell me if my payments vary with my sales?
In Florida, a covered provider must disclose how the variable payment is worked out. Under the Florida Commercial Financing Disclosure Law, if payment amounts may vary, the written disclosure must state how often payments are taken, the estimated amount of the first payment, the method used to calculate any variable payment, and the circumstances in which payments may change.
The disclosure must be given at or before the deal closes.
The law does not tell you whether a deal lets payments fall when your sales fall. That depends on your contract, so read the reconciliation or adjustment wording and ask what proof of lower sales is required and how long an adjustment takes.
The law has limits: it excludes certain providers such as federally insured banks, and transactions over $500,000. Other states differ, and many providers are not covered. Get the terms in writing before you sign, and consider legal advice.
Next: Business funding
Related: What should I check before accepting a merchant cash advance?; How do I compare a factoring or merchant cash advance offer with a loan?
Sources (read 2026-11-01): Florida Statutes 559.9613 Disclosures; Florida Statutes 559.9612 Scope of this part
What is a confession of judgment in a financing contract?
A confession of judgment is a clause in which you agree in advance that a court may enter judgment against you if the provider alleges a default. In the FTC's merchant cash advance case against RCG Advances, the agency alleged the defendants required businesses and their owners to sign confessions of judgment, letting them obtain uncontested judgments in case of an alleged default.
The point is that you may not get a chance to argue your side before a judgment exists.
These are the FTC's allegations in that case. In October 2023 the FTC announced that the owner, Jonathan Braun, was permanently banned from the merchant cash advance and debt collection industries.
Whether such a clause is allowed or enforceable depends on the state and on whether you are an individual or a business, which this answer does not cover. Before signing, ask whether the contract contains one, who it binds (including you personally), and have a lawyer review it.
Next: Business funding
Related: What should I check before accepting a merchant cash advance?; Will I have to give a personal guarantee on a factoring or advance deal?
Sources (read 2026-11-01): FTC: case leads to permanent ban against merchant cash advance owner (30 Oct 2023)
What is a UCC lien and how does it affect my receivables?
A UCC lien is a public filing, called a financing statement, that tells other creditors someone claims a security interest in your assets. It can cover receivables if the filing describes them.
Under UCC section 9-502, a financing statement must give the debtor's name, name the secured party, and indicate the collateral covered. A broad collateral description can reach more than one asset type.
This affects you in two ways. If a lender or factor already has a lien on your receivables, a second financier may refuse to fund or may ask for a payoff. And a blanket lien can limit what you can pledge elsewhere. Search your state's UCC records, or ask your lender, before you take on a new deal.
Lien rules are state law and the UCC is adopted state by state. In Canada, provincial personal property registries do a similar job. Ask a lawyer about your specific filing.
Next: US funding resources
Related: Is a sale of receivables treated like a secured loan under US commercial law?; How do I get a UCC lien removed after I repay a financing?
Sources (read 2026-11-01): UCC 9-502: contents of financing statement
Can a lien on my receivables cover invoices I have not created yet?
Yes, in the US a security agreement can reach receivables you create later. UCC section 9-204(a) says a security agreement may create a security interest in after-acquired collateral, and 9-204(c) says it may secure future advances, or provide that accounts are sold in connection with future advances, whether or not the advances are committed.
That is why many receivables deals say the financier takes new invoices as you create them, not just today's invoices.
The exceptions in 9-204(b) cover consumer goods and commercial tort claims, which rarely matter for ordinary invoices.
Check the collateral description in your contract. Words such as all accounts, now owned or hereafter acquired, can tie up your whole sales ledger, and may block other financing.
Ask whether the lien can be limited to named customers or invoices, and how you get invoices released. This is the US model rule, not legal advice.
Next: Business funding
Related: What is a UCC lien and how does it affect my receivables?; Can I borrow against my receivables instead of selling them?
Sources (read 2026-11-01): UCC 9-204 After-acquired property; future advances
What can I do if a UCC filing against my business is wrong?
You can file an information statement with the filing office. The model UCC section 9-518(a) lets a person file one about a record indexed under their name if they believe it is inaccurate or was wrongfully filed.
The statement must identify the record by its file number, say it is an information statement, and explain why you think the record is wrong and how it should be corrected. Under the model text it does not by itself remove the original filing.
So do two things in parallel. Ask the filer in writing to amend or terminate the filing, and keep your signed contracts and payoff letters to show what you agreed.
If the filer will not act, a lawyer can advise on formal remedies in your state.
This is the US model rule; state versions and forms vary, and Canadian provinces have their own registry processes.
Next: Business funding
Related: How do I get a UCC lien removed after I repay a financing?; Can a lender file a UCC lien against my business without my permission?
Sources (read 2026-11-01): UCC 9-518 Claim concerning inaccurate or wrongfully filed record
Will I have to give a personal guarantee on a factoring or advance deal?
It is possible, so check the contract. Some providers ask the owner to sign a personal guarantee; others do not. Do not rely on a sales promise.
In the FTC's 2020 case against Yellowstone Capital and Fundry, the agency alleged the companies promised "no collateral" and "no personal guarantee" but the merchant cash advances actually had both. Those are allegations in the FTC's complaint, not findings for any other provider.
The FTC also says these advances are often marketed to owners who do not qualify for bank loans, and alleges large fees were withheld from the advertised amount.
Before signing, find the guarantee clause, ask what triggers it, and get the promised terms in writing. A lawyer can explain how a guarantee could reach your personal assets. Factoring of invoices often differs from a cash advance, but the same check applies.
Next: US funding resources
Related: What should I check before accepting a merchant cash advance?
Sources (read 2026-11-01): FTC consumer alert: small businesses targeted with unauthorized withdrawals
What is a notice of assignment and do customers have to pay the factor?
A notice of assignment is a written notice telling your customer that an invoice has been assigned and that payment must go to the new owner. In US commercial law, once the customer receives a proper notice, it must pay the assignee, and paying you instead no longer discharges the debt.
UCC section 9-406 says that before notice the customer can pay you and be discharged. The notice must be authenticated by you or the assignee, state that the amount was assigned and that payment is to be made to the assignee, and reasonably identify the rights assigned. The customer can ask for reasonable proof of the assignment.
Section 9-406 also generally makes contract terms that bar assignment of an account ineffective, with exceptions.
Some factoring deals are "non-notification", where customers keep paying you. Ask the provider which model applies. Canadian law differs by province, so this answer is US-focused.
Next: US funding resources
Related: Who collects from my customers if I factor invoices?; Will my customers know I am using factoring?
Sources (read 2026-11-01): UCC 9-406: discharge of account debtor; notification of assignment
Can I factor invoices owed by a US federal agency?
Sometimes, but federal payments have special assignment rules. Under 31 U.S.C. 3727, an assignment of a claim against the United States is generally valid only after the claim is allowed and a payment warrant has been issued, with formalities such as witnesses and acknowledgment.
There is an exception for assignments to a financing institution of money due under a contract with payments of at least $1,000. It requires that the contract not forbid assignment, that the assignment cover the whole unpaid amount, go to one party (which may act as agent or trustee for several lenders) and not be reassigned, and that written notice and a copy be filed with the contracting official or agency head, the surety and the disbursing official.
So a federal contract's own terms and these filings matter. Ask a government-contracts lawyer and the contracting officer before you assign payments. Canadian federal debts follow a different statute.
Next: US funding resources
Related: Can I assign payments owed by the Canadian federal government to a financier?
Sources (read 2026-11-01): 31 U.S.C. 3727: assignments of claims
Which state do I search or file in for a UCC lien on my business?
Generally the state where your business is located for UCC purposes, which depends on how the business is organised. Under UCC section 9-307, a registered organization such as a corporation or LLC organised under a state's law is located in that state. Other organisations with one place of business are located there, and those with several are located at their chief executive office.
This matters because liens on receivables are usually filed with the state filing office for that location, so a lender searching or filing in the wrong state may miss a prior claim.
If you are an individual or a sole proprietor, the model rule uses your principal residence.
Before you take new financing, search the filing office for your state of organisation and ask your lender where it will file. This describes the US model rule only. Canadian provinces run their own registries, and rules can change if you move or reorganise.
Next: Business funding
Related: What is a UCC lien and how does it affect my receivables?; If two financiers claim my receivables, who gets paid first?
Sources (read 2026-11-01): UCC 9-307 Location of debtor
Can I ask a financier for an accounting of what I owe?
Yes, in the US you can send a secured party a written request for an accounting. Under UCC section 9-210, a debtor may ask for an accounting of unpaid obligations, or for approval or correction of the list of collateral or of the statement of the total unpaid secured amount as of a stated date.
The secured party generally must respond within 14 days of receiving an authenticated request. You get one free response in each six-month period, and the secured party may charge up to $25 for each additional response.
Buyers of accounts and similar assets are not subject to this duty, so it may not help in a pure factoring sale. A secured party that no longer claims an interest must disclaim it within the same period and identify any known assignee.
State versions differ and contract terms may add rights. Keep proof you sent the request.
Next: US funding resources
Related: What is a UCC lien and how does it affect my receivables?; How do I get a UCC lien removed after I repay a financing?
Sources (read 2026-11-01): UCC 9-210: request for accounting
Does a lender's lien on my receivables follow the cash when customers pay?
Often yes. Under UCC section 9-315, a security interest continues in collateral after it is sold or disposed of unless the secured party authorised that, and it also attaches to identifiable proceeds of the collateral. When customers pay an invoice, the money is proceeds.
If proceeds are mixed with other money, they stay identifiable only to the extent the secured party can trace them under permitted methods. A perfected security interest in proceeds generally continues, and special time limits apply to some kinds of proceeds, including a 21 day rule in 9-315(d) in some cases.
In practice this is why lenders may ask you to route customer payments to a controlled account, and why spending collected cash can breach a deal.
Ask where customer payments must go and what you may do with them. This is the US model rule; ask a lawyer about your state and agreement.
Next: Business funding
Related: What is a deposit account control agreement or blocked account?; Can a lien on my receivables cover invoices I have not created yet?
Sources (read 2026-11-01): UCC 9-315 Secured party's rights on disposition of collateral and in proceeds
If my customer has a dispute with me, can the factor still collect the full invoice?
Not necessarily. Under UCC section 9-404(a), unless the customer has made an enforceable agreement not to assert defenses, the factor's rights are subject to the terms of your contract with the customer and any defense or claim arising from that transaction, plus other defenses that accrue before the customer receives a proper notice of assignment.
In plain terms, if you shipped late or the goods were faulty and the customer has a valid claim, that can reduce what the factor collects. Under 9-404(b), a customer's claim can only reduce the amount owed to the assignee.
This is why factors check invoice quality, may refuse disputed invoices, and may have recourse against you for them. Ask your agreement who bears the risk of disputes and how disputed invoices are handled.
This is the US model rule, not legal advice.
Next: Business funding
Related: What is a notice of assignment and do customers have to pay the factor?; What happens if my customer does not pay a factored invoice?
Sources (read 2026-11-01): UCC 9-404 Rights acquired by assignee; claims and defenses against assignee
What is a deposit account control agreement or blocked account?
It is an arrangement where a lender gets legal control over a bank account, often the one that receives customer payments. Under UCC section 9-104(a), a secured party has control of a deposit account if it is the bank itself, if the debtor, secured party and bank agree in an authenticated record that the bank will follow the secured party's instructions without further consent from the debtor, or if the secured party becomes the bank's customer for the account.
Subsection (b) adds that the lender still has control even if you keep the right to direct the funds.
Lenders and factors use these accounts to be sure collections go where the contract says.
Before agreeing, ask which accounts are covered, whether you can still pay bills from them, when the lender can sweep funds, and how control ends when you repay. It is also worth checking whether your bank charges fees or has its own form. This is the US model rule, not legal advice.
Next: Business funding
Related: Does a lender's lien on my receivables follow the cash when customers pay?; Who collects from my customers if I factor invoices?
Sources (read 2026-11-01): UCC 9-104 Control of deposit account
How long does a UCC lien filing last, and does it expire?
A filed UCC financing statement is generally effective for five years. Under UCC section 9-515, it lapses at the end of that period unless a continuation statement is filed, and a continuation may be filed only within the six months before the five-year period ends. A timely continuation extends effectiveness for another five years.
When a filing lapses, the security interest it perfected generally becomes unperfected, unless it is perfected another way. That can change who ranks first among lenders, but it does not by itself cancel what you owe.
Special longer periods apply to some public-finance and manufactured-home filings.
So an old filing showing in a search may still be live. Check the date, ask your lender whether a continuation was filed, and use the written termination process once you have repaid.
This is the US model rule; state versions apply, and Canadian registrations follow provincial rules.
Next: Business funding
Related: How do I get a UCC lien removed after I repay a financing?; What is a UCC lien and how does it affect my receivables?
Sources (read 2026-11-01): UCC 9-515 Duration and effectiveness of financing statement
What is a reserve or holdback in a factoring deal?
A reserve or holdback is the part of an invoice's value the factor does not pay up front. BDC describes the advance rate as the percentage of the invoice value paid to you at the start, and says the factoring company may hold back a percentage until the customer pays.
That means the cash you receive on day one is less than the invoice face value. What happens to the held-back amount later, and what fees are taken from it, is set by the contract. BDC says factoring costs can include the factoring rate plus other fees such as setup, monthly minimums and service charges.
Before signing, ask for a worked example: invoice amount, advance paid, held-back amount, every fee, and exactly when and how the remainder is released. Compare that to a line of credit or purchase order financing. You can send CELER an enquiry, but this is information only.
Next: Business funding
Related: What fees can a factoring arrangement include?; What is invoice factoring and is it the same as a loan?
Sources (read 2026-11-01): BDC glossary: Factoring
What happens if my customer does not pay a factored invoice?
It depends on the contract, mainly whether the deal is recourse or non-recourse. If the factor assumed the risk, it bears the loss within its terms. If you carry it, you may have to repay the advance or replace the invoice.
BDC notes that factoring charges can include a fee for taking on the risk of non-payment, so who bears the loss is priced. Under UCC section 9-608, for a sale of accounts the default is that the seller is neither entitled to a surplus nor liable for a deficiency when collections are applied, but the actual contract may say otherwise.
Check how the agreement defines non-payment, how long before a charge-back, whether disputed invoices are excluded, and whether fees keep running. Trade credit insurance can be a separate option; EDC describes cover for non-payment by buyers.
This is information, not legal advice.
Next: Business funding
Related: What is the difference between recourse and non-recourse factoring?; Can credit insurance help me get financing for receivables?
Sources (read 2026-11-01): BDC glossary: Factoring; UCC 9-608: application of collection proceeds
Can a broker charge me an upfront fee to arrange business financing?
In Florida, brokers covered by the Commercial Financing Disclosure Law may not assess, collect or solicit an advance fee for their broker services. The law defines an advance fee as consideration collected by a broker before the financing closes.
There is a narrow exception for paying actual services needed to apply, such as a credit check or an appraisal, if payment is made by check or money order to a party independent of the broker.
A broker is a person who arranges a commercial financing transaction or offer for compensation, with some exclusions.
Other states and Canada may have different rules, and many brokers work on commission paid by the provider instead. Ask any broker how they are paid, in writing, and by whom. Be careful with anyone who asks you to pay before you have a signed offer. The Florida Attorney General can receive complaints. This is general information, not legal advice.
Next: Business funding
Related: What can a financing broker not do under Florida law?; Where do I report a problem with a merchant cash advance provider?
Sources (read 2026-11-01): Florida Statutes 559.9614 Prohibited acts; Florida Statutes 559.9611 Definitions (Commercial Financing Disclosure Law)
Does Florida's commercial financing disclosure law apply to every deal?
No. Florida's law applies to commercial financing transactions completed on or after 1 January 2024, but it has several exclusions. It does not apply to federally insured depository institutions and their affiliates, or to Farm Credit Act lenders.
It also excludes transactions secured by real property, leases, and certain purchase money obligations. Other exclusions include money transmitters, providers that complete no more than five transactions in Florida in 12 months, and transactions of more than $500,000.
So a bank loan, a large facility or a lease may fall outside it, even though a typical small factoring or cash advance deal might be covered.
This does not tell you whether a given deal is fair. If you are told no disclosure is required, ask why, and still request total cost, payment and prepayment terms in writing.
This is a summary of the statute as read on 1 Nov 2026. Check the current text and get legal advice if the amount is material.
Next: Business funding
Related: What must a provider tell me if my payments vary with my sales?; Do any US state rules require disclosure of factoring or advance costs?
Sources (read 2026-11-01): Florida Statutes 559.9612 Scope of this part
Can I sue a provider in Florida for not giving the required financing disclosure?
Under the statute, no. Florida's Commercial Financing Disclosure Law says it does not create a private right of action based on compliance or noncompliance. The Attorney General has exclusive authority to enforce it, and may receive complaints, seek voluntary compliance, and bring administrative or judicial proceedings.
A violation is punishable by a fine of $500 per incident, up to $20,000 in total. After written notice of a prior violation, it is $1,000 per incident, up to $50,000.
The law also says a violation does not affect the enforceability or validity of the underlying financing deal. So a missing disclosure alone does not necessarily cancel the contract.
Your contract and other laws may give other rights, such as claims for fraud or misrepresentation, which this answer does not cover. If you think a disclosure was missing, keep the documents and consider a complaint to the Attorney General and advice from a lawyer.
Next: Business funding
Related: Does Florida's commercial financing disclosure law apply to every deal?; Where do I report a problem with a merchant cash advance provider?
Sources (read 2026-11-01): Florida Statutes 559.9615 Enforcement
Does Florida have a commercial financing disclosure law like California's?
Yes. Florida has a Commercial Financing Disclosure Law, in chapter 559 of its statutes, covering deals completed on or after 1 January 2024. It covers commercial loans, commercial open-end credit and accounts receivable purchase transactions, which is the statute's name for selling invoices at a discount.
A covered provider must give a written disclosure at or before closing. It includes funds provided, funds disbursed, total to be repaid, total dollar cost, payment details and prepayment costs. Unlike California, the Florida text I read does not call for an annual percentage rate.
The statute says a provider's characterisation of a receivables purchase as a purchase is conclusive that it is not a loan for this part.
Other states have their own laws and exemptions, and this record does not list them. Check your state regulator. This is information, not legal advice.
Next: Business funding
Related: Do any US state rules require disclosure of factoring or advance costs?; Does Florida's commercial financing disclosure law apply to every deal?
Sources (read 2026-11-01): Florida Statutes 559.9611 Definitions (Commercial Financing Disclosure Law); Florida Statutes 559.9613 Disclosures
What can a financing broker not do under Florida law?
Besides charging advance fees, a Florida broker may not make false or misleading statements or leave out a material fact when offering broker services. The Commercial Financing Disclosure Law also bars any act that operates as fraud or deception on any person in connection with offering those services, even if the business did not rely on it, and any false or deceptive representation in business dealings.
An advertisement offering broker services must show the broker's actual address and phone number, and those of any forwarding service it uses.
A broker here means someone who, for compensation or the expectation of it, arranges a deal between a business and a third party, with some exclusions.
This protects against some bad practices but is not a licence regime. Ask a broker to explain who pays them and how much, get it in writing, and verify the address and contact details. This is general information, not legal advice.
Next: Business funding
Related: Can a broker charge me an upfront fee to arrange business financing?; Can I sue a provider in Florida for not giving the required financing disclosure?
Sources (read 2026-11-01): Florida Statutes 559.9614 Prohibited acts
Can a cash advance provider keep taking payments after I have repaid in full?
It should not, and the FTC has alleged it happened. In its 2020 action against Yellowstone Capital and Fundry, the FTC alleged the companies kept taking daily payments from businesses after they had fully repaid their merchant cash advances. That is an allegation, not a finding about any other provider.
If you think a provider is over-collecting, act on the paper. Add up the amount due under your contract and every debit taken, ask the provider in writing for a payoff statement and refund, and tell your bank you dispute the debits.
The FTC page does not set out steps, so these are our suggestions only. Keep bank statements and the signed contract.
Also check whether your contract allows reconciliation, which can change how much is owed. You can report concerns to the FTC, as covered in our other answer. This is general information, not legal advice.
Next: Business funding
Related: Where do I report a problem with a merchant cash advance provider?; What should I check before accepting a merchant cash advance?
Sources (read 2026-11-01): Small businesses targeted with unauthorized withdrawals (FTC consumer alert, Aug 2020)
Where do I report a problem with a merchant cash advance provider?
In the US, start with the FTC's Report Fraud site, reportfraud.ftc.gov. The FTC's consumer alert on small businesses targeted with unauthorized withdrawals points owners to that link.
The alert describes a 2020 complaint alleging two providers kept making daily withdrawals after businesses had fully repaid. It does not give step-by-step instructions for stopping withdrawals, so also contact your bank about the debit authorization and keep records: contract, statements, payoff proof and messages.
You can also contact your state attorney general or financial regulator. In Canada, the Canadian Anti-Fraud Centre takes reports, but this answer relies on the FTC page only. Report quickly, and talk to a lawyer before you stop payments, because stopping them may breach the contract.
Next: US funding resources
Related: What should I check before accepting a merchant cash advance?
Sources (read 2026-11-01): FTC consumer alert: small businesses targeted with unauthorized withdrawals
Is selling my invoices treated as a loan under Florida's disclosure law?
For purposes of that law, a provider's own label usually settles it. Florida's definition of an accounts receivable purchase transaction says the provider's characterization of it as a purchase is conclusive that the transaction is not a loan, or a transaction for the use, forbearance or detention of money.
The law still covers these deals. A covered receivables purchase must come with the written disclosure of funds provided, funds disbursed, total repayment and total dollar cost.
That definition is specific to Florida's disclosure part. It does not decide how other laws treat the deal, such as tax, lien or interest rate rules, and courts elsewhere may look at the substance, not the label.
If the label matters to you, for example for a lender covenant or accounting, ask an accountant or lawyer in your own state. This is information, not legal advice.
Next: Business funding
Related: Is a sale of receivables treated like a secured loan under US commercial law?; What is invoice factoring and is it the same as a loan?
Sources (read 2026-11-01): Florida Statutes 559.9611 Definitions (Commercial Financing Disclosure Law); Florida Statutes 559.9613 Disclosures
What small business loan options exist if I am considering a cash advance because my credit is weak?
One US option is an SBA microloan, which provides loans of up to $50,000 through nonprofit intermediary lenders. SBA's page says the average microloan is about $13,000 and the maximum term is seven years.
Microloans can be used for working capital, inventory, supplies, furniture, fixtures, machinery and equipment. They cannot be used to pay existing debts or to buy real estate.
You apply through an SBA-approved intermediary in your area, and that lender makes all credit decisions and sets the terms. Interest rates vary and are generally between 8% and 13% according to SBA.
Approval is not guaranteed, and a microloan may be slower than an advance. It may not fit if you need to refinance a cash advance.
Other routes may include a local bank or credit union, a community lender, or a customer deposit. Compare total cost first. This is information only.
Next: US funding resources
Related: What should I check before accepting a merchant cash advance?; Can an SBA loan be used to refinance business debt such as a cash advance?
Sources (read 2026-11-01): SBA Microloans
How do I get a UCC lien removed after I repay a financing?
After you repay, ask the secured party in writing to file a UCC termination statement. Under UCC section 9-513, for collateral other than consumer goods, the secured party generally has 20 days after receiving your authenticated demand to send you a termination statement or file one with the filing office.
That duty applies when no secured obligation or lending commitment remains, when sold accounts have been paid, or when you never authorized the filing. For consumer goods the rule is different, with a one-month default deadline.
Once a termination statement is filed, the financing statement stops being effective, subject to section 9-510.
Keep your payoff letter and send the demand in a form you can prove. Then search the public record to confirm the lien is gone. Rules vary by state and Canadian provinces use their own personal property registries, so check local requirements or ask a lawyer.
Next: US funding resources
Related: What is a UCC lien and how does it affect my receivables?
Sources (read 2026-11-01): UCC 9-513: termination statement
Can an SBA loan be used to refinance business debt such as a cash advance?
It may be possible, but not through every SBA program. SBA's 7(a) page lists refinancing current business debt among the permitted uses, alongside working capital, equipment and changes of ownership. SBA's microloan page says microloan proceeds cannot pay existing debts.
Whether a particular debt, including a merchant cash advance, qualifies depends on the lender and SBA's detailed rules, which this record does not confirm. SBA lenders make the credit decision, and borrowers must be creditworthy and show a reasonable ability to repay.
7(a) loans have a maximum of $5 million and are applied for through a participating lender, not SBA.
If you are thinking about this, ask a lender early whether your specific debt can be refinanced and what the process looks like. Do not stop payments on the existing contract without legal advice. This is information only, not a promise of approval.
Next: US funding resources
Related: What small business loan options exist if I am considering a cash advance because my credit is weak?; Is there an SBA line of credit that borrows against receivables?
Sources (read 2026-11-01): SBA 7(a) loans overview and Working Capital Pilot; SBA Microloans
Is there an SBA line of credit that borrows against receivables?
SBA's page describes a 7(a) Working Capital Pilot, or WCP, which offers monitored lines of credit within the 7(a) program. It lists borrowing against accounts receivable or inventory as one reason to consider it.
As read on 1 Nov 2026, the page gives a maximum of $5 million, a maximum maturity of 60 months, and a guarantee of 85% for loans of $150,000 or less and 75% above that. Interest rate caps depend on loan size.
It is a pilot, so terms may change or end. SBA says businesses should have at least one year of operating history and be able to produce timely financial statements, plus receivables and payables agings and inventory reports.
You apply through a participating SBA lender, which makes the credit decision. Approval is not guaranteed. A bank line of credit, covered in our other answer, may also be worth comparing.
Next: US funding resources
Related: Can I borrow against my receivables instead of selling them?; How does factoring compare with a line of credit or purchase order financing?
Sources (read 2026-11-01): SBA 7(a) loans overview and Working Capital Pilot
How is a disclosure given for a revolving factoring facility in Florida?
Florida lets the provider disclose using a $10,000 example. For a commercial financing facility, meaning a plan to buy multiple receivables over time under one agreement, the provider may base the written disclosure on an example transaction that could occur under the agreement.
The example must be based on an account receivable total face amount owed of $10,000. Only one disclosure is required for each facility, and a new disclosure is not required each time receivables are purchased under it.
So your real cost on each invoice may differ from the example, because actual invoices, payment timing and fees can differ. Ask for the pricing schedule, minimums and fee triggers as well.
The rule applies only to covered deals, with exclusions such as banks and amounts over $500,000. This is a summary of the statute, not legal advice.
Next: Business funding
Related: How do I compare a factoring or merchant cash advance offer with a loan?; What fees can a factoring arrangement include?
Sources (read 2026-11-01): Florida Statutes 559.9611 Definitions (Commercial Financing Disclosure Law); Florida Statutes 559.9613 Disclosures
Do I have to be told about prepayment costs on a financing deal?
In Florida, yes for covered deals. The written disclosure must say whether there are any costs or discounts associated with prepayment, and refer to the contract provision that creates the parties' rights on prepayment. It must be given at or before the deal closes.
That tells you whether prepayment exists, not what the best choice is. Some advances and factoring arrangements charge a fixed total regardless of when you pay, so paying early may save nothing. Others allow a discount.
Ask the provider for a payoff figure in writing for different dates, for example in 30, 60 and 90 days, and compare each with your remaining obligation.
Florida's law has exclusions, such as banks, transactions over $500,000 and providers with few deals, and other states differ. This is general information, not legal advice.
Next: Business funding
Related: How do I compare a factoring or merchant cash advance offer with a loan?; Does Florida's commercial financing disclosure law apply to every deal?
Sources (read 2026-11-01): Florida Statutes 559.9613 Disclosures
Do US federal agencies owe interest when they pay a small business late?
Generally yes. Treasury's Fiscal Service says that when a federal agency pays a vendor late, it generally must pay interest.
The agency must pay on time if you submit a proper invoice to the right people in the agency. As of 1 November 2026, the Prompt Payment interest rate for 1 July to 31 December 2026 is 4.75%, and the rate is reset for later periods. The implementing rule is 5 CFR Part 1315.
For small businesses, agencies should pay early when they have a proper invoice, early payment is in the government's best interest, and the invoice is under $2,500, the payee is a small business, or the payment relates to an emergency, disaster or military deployment.
This covers federal agencies only. State, provincial and private customers follow their own laws and contract terms. Keep invoice dates and submission records.
Next: US funding resources
Related: What happens if my customer does not pay a factored invoice?
Sources (read 2026-11-01): Prompt Payment (Fiscal Service)
Can I assign payments owed by the Canadian federal government to a financier?
Only if the assignment follows the Financial Administration Act. Section 67 says that, subject to exceptions in federal law, a Crown debt cannot be transferred and a transaction trying to transfer it gives no rights against the debt. Section 66 defines a Crown debt as an existing or future debt due or becoming due by the Crown.
Section 68(2) then sets conditions for a valid assignment: it must be absolute, in writing and under the assignor's hand, must not be by way of charge only, and notice must be given to the Crown as section 69 provides. Under section 68(3), it takes effect against the Crown from when notice is served. Pay and wages cannot be assigned.
Because the assignment must be absolute and not merely a charge, some security structures do not fit. Talk to a Canadian lawyer and the contracting department before you assign. Provincial and municipal customers follow different rules.
Next: Canada funding resources
Related: Can I factor invoices owed by a US federal agency?
Sources (read 2026-11-01): Financial Administration Act s.66 (Crown debt); Financial Administration Act s.67; Financial Administration Act s.68
What CELER is and is not. celerfunding.com is operated by Celer Merchants Corporation. We are not a lender, grantmaker, government agency, investment portal or licensed adviser, and we are not an official partner of the programs mentioned here. This page is general information, not legal, tax, investment or credit advice. A CELER enquiry is not an official grant or loan application.