Invoice factoring vs line of credit
Quick answer
Invoice factoring sells your unpaid invoices for fast cash and is approved on your customers' credit. A business line of credit is revolving credit you draw against, approved on your own credit and revenue.
Factoring is faster and easier to qualify for but costs more per dollar; a line of credit is cheaper but needs stronger credit. Many contractors keep both.
These are the two workhorses of construction cash flow, and contractors constantly ask which one to use.
The honest answer is that they solve the same problem in different ways, and the right pick depends on your credit and the situation in front of you.
Key takeaways
- → Factoring is approved on your clients' credit; a line of credit on yours.
- → Factoring is faster and credit-light; a line of credit is cheaper per dollar.
- → Use factoring for slow-pay and big invoices; a line for routine gaps.
- → Many established contractors run both for different situations.
How they compare
| Invoice factoring | Line of credit | |
|---|---|---|
| Approved on | Your client's credit | Your credit and revenue |
| Speed | 24–48 hours | Same day to a few days |
| Cost | 1–3% fee per invoice | Interest on what you draw (lower) |
| Best for | Slow-paying GCs, weak credit, big invoices | Recurring gaps, stronger credit |
| Reusable | Per invoice | Revolving |
When to use factoring
Factoring wins when speed and easy approval matter most — a subcontractor waiting on a general contractor, a business with thin personal credit, or one giant invoice you need turned into cash now.
When to use a line of credit
A line of credit wins for routine, recurring swings when you have the credit and revenue to qualify. You only pay for what you draw, so it's the cheaper everyday tool.
Why not both?
Plenty of contractors keep a line for the day-to-day and factoring on standby for the occasional invoice that's too big or too slow for the line. The working capital overview covers the full toolkit.
eBoost Partners offers both factoring and lines of credit through its construction business financing, so you can compare them on one application.