Invoice Financing / Factoring — TD Bank, N.A.

Invoice financing and factoring offered by TD Bank, N.A. provide short-term working capital solutions that help businesses convert outstanding customer invoices into immediate cash. Designed for companies that experience cash flow gaps due to long payment cycles, seasonal demand, or rapid growth, these solutions enable more predictable cash flow, improved liquidity, and greater operational flexibility without taking on traditional long-term debt.

What is Invoice Financing and Factoring?

Invoice financing typically refers to lending secured by a company’s outstanding invoices. A lender advances a percentage of the invoice value — often called an advance rate — and holds the invoices as collateral until customers pay. Factoring, in contrast, involves the sale of invoices to a factor (the financing entity) at a discount in exchange for immediate funds. The factor assumes responsibility for collections and may provide credit protection or manage receivables on behalf of the client, depending on the agreement type.

Core Benefits

• Immediate liquidity: Access funds tied up in unpaid invoices within days, helping to cover payroll, supplier costs, and growth initiatives.
• Predictable cash flow: Reduce the uncertainty of long customer payment terms and align cash availability with operational needs.
• Flexible financing: Financing grows with your sales; as invoiced receivables increase, available borrowing capacity typically rises.
• Outsourced receivables management: With factoring, administrative burdens such as collections and credit monitoring may be handled by the factor.
• Minimal dilution of equity: Obtain working capital without issuing shares or giving up ownership.

Key Features and Structure

TD Bank’s invoice financing and factoring solutions can be customized to fit industry-specific needs and business size. Typical features include:

• Advance rates: A portion of each approved invoice (commonly 70%–90%) is advanced immediately.
• Reserve account: The remaining invoice value is held in reserve until the customer pays; after fees, the reserve is released.
• Recourse and non-recourse options: Recourse factoring requires the seller to buy back uncollected invoices; non-recourse transfers credit risk for eligible invoices.
• Credit evaluation: The factor may underwrite based on your customers’ creditworthiness, which affects pricing and availability.
• Reporting and integration: Reporting tools and integration with accounting systems help streamline receivables reporting and funding requests.

Who Can Benefit?

Businesses across many industries benefit from invoice financing and factoring, particularly those that sell to other businesses (B2B) and operate on net payment terms. Common candidates include:

• Wholesale distributors and manufacturers
• Staffing and services firms
• Transportation and logistics providers
• Professional services and contractors
• Companies experiencing rapid growth or seasonal fluctuations

Typical Eligibility Criteria

Eligibility depends more on the creditworthiness and payment history of your customers than on your business’s age or credit score, although the latter may be considered. Typical criteria include:

• Invoiced receivables owed by creditworthy businesses
• Established billing and delivery documentation
• Clear terms of sale and customer payment history
• Compliance with anticorruption and anti-money laundering requirements

Application and Implementation

The process for establishing invoice financing or factoring is generally straightforward and designed to get funds to clients quickly:

1. Initial consultation: Discuss needs, typical invoice profiles, and the structure that best fits your business.
2. Credit assessments: Underwriting focuses on buyer credit and invoice legitimacy.
3. Agreement and setup: Contract documentation outlines advance rates, fees, recourse terms, and reporting requirements.
4. Onboarding and funding: After setup, submit invoices for funding; approved invoices result in near-immediate advances.

Costs and Pricing

Pricing varies with the risk profile of the receivables, advance rate, contract terms, and whether the arrangement is recourse or non-recourse. Typical cost components include:

• Discount or factoring fee: A percentage of the invoice value charged for the service; may be calculated daily or monthly based on the invoice age.
• Interest on advances: When structured as invoice financing, interest may apply to the borrowed amount until the invoice is paid.
• Service and administrative fees: Fees for collections, credit checks, and account maintenance may apply.

Risk Management and Compliance

Effective invoice financing includes robust risk management, including due diligence on counterparties and ongoing monitoring of receivables. Users should expect compliance with banking regulations, anti-fraud controls, and credit reviews. Choosing a partner with strong credit assessment capabilities helps mitigate exposure to slow-paying or insolvent buyers.

Use Cases and Examples

Invoice financing works well for companies that:

• Need immediate cash to seize growth opportunities without diluting ownership
• Face long payment cycles from large corporate customers or government entities
• Want to outsource receivables management to focus internal resources on core activities
• Require a scalable financing line that aligns with sales volume

Why Choose TD Bank, N.A.?

TD Bank, N.A. brings a combination of financial expertise, industry experience, and personalized service. Clients benefit from a consultative approach that assesses the unique cash flow dynamics of the business, flexible structuring options, and tools to simplify receivables management. The bank’s focus on long-term client relationships supports tailored financing solutions that evolve as business needs change.

Important Considerations

Before entering an invoice financing or factoring arrangement, businesses should:

• Review contract terms carefully, paying attention to recourse provisions and termination clauses.
• Understand how pricing is calculated and how long fees will apply.
• Assess the impact on customer relationships if collections are managed externally.
• Consider integrating financing tools with accounting systems for efficient operations and reporting.

Conclusion

Invoice financing and factoring are effective tools for improving cash flow, stabilizing working capital, and supporting growth without taking on long-term debt or diluting ownership. With flexible structures, credit-based underwriting, and operational support, these solutions can be tailored to meet the needs of a wide range of businesses. TD Bank, N.A. offers expertise and customizable programs designed to help companies unlock the value trapped in unpaid invoices and convert receivables into reliable funding for ongoing operations and strategic initiatives.

Address Bank: Cherry Hill, New Jersey, United States
Bank: TD Bank, N.A.
Headquarters: Cherry Hill, New Jersey
Products: Loans & Credit
Type: Invoice Financing / Factoring