You Are Already a Lender
Every invoice you send on net 30 is a loan. You did the work, you paid for the labor and the materials, and then you handed your customer 30 days to pay you back, interest free, whether you thought of it that way or not. On net 60 you doubled the loan. Most owners looking for working capital financing are trying to borrow their way around a loan they already made and never priced.
The numbers on this are not small. Upflow's State of B2B Payments put the median days sales outstanding across industries at 56 days. Fifty-six. That is nearly 2 months, on average, between finishing the work and seeing the cash, and the average understates it because a large share of invoices land late on top of the terms. By one widely cited figure, roughly 55 percent of B2B invoices in the United States get paid late, and the typical small business is carrying more than $17,000 in unpaid invoices at any given moment. The cost of chasing all of it, in interest on borrowed working capital and staff time and write-offs, has been estimated at around $39,000 a year for the average company. That is real money, and none of it is a financing problem. It is a collections problem wearing a financing problem's clothes.
Shorten the gap before you rent money to cover it
Here is the arithmetic that reframes the whole decision. Say your DSO is 56 days and your annual revenue is $12 million. That is roughly $1.84 million tied up in receivables at any moment. Pull DSO down to 45 days through nothing more exotic than tighter terms and disciplined follow-up, and you have freed about $360,000 in cash. Permanently. At no cost. Compare that to factoring the same receivables, where market rates in 2025 ran around 2.5 percent for the first 30 days, or to an advance at an annualized cost many times higher. The cheapest capital in your business is the cash your customers already owe you and simply have not sent.
The levers are unglamorous and they work. Invoice the day the work is done, not at month end, because the clock does not start until the invoice lands. Put the payment terms and the due date in plain type where the customer cannot miss them. Call your largest overdue accounts yourself, owner to owner, before they age another cycle. Ask for deposits or milestone billing on long jobs so you are not financing the entire project out of your own pocket. None of this requires a lender's signature, and all of it attacks the actual number.
When the terms are the industry, not the mistake
Sometimes the gap is not sloppiness. It is structure. If you sell into large customers, you already know the terms are theirs to set. Net 30 is the most common B2B term in North America, used by something like 60 percent of companies, and plenty of manufacturers and B2B service firms operate on net 45, 60, even 90 because their biggest buyers insist on it. You cannot collections-discipline your way out of a 90-day term dictated by a customer 10 times your size.
That is the case where financing earns its keep. When the receivable is real, the customer is creditworthy, and the terms are fixed by the structure of your market rather than by your own lax follow-up, factoring against that book is a rational trade. You are converting a solid asset into cash sooner and paying a known price to compress a cycle you genuinely cannot shorten yourself. The instrument fits the shape of the problem.
The point is to know which situation you are in before you sign anything. So run the number. Take your receivables balance, divide by daily revenue, and read your DSO honestly. Then ask how much of it is terms you cannot change and how much is time you are simply not collecting. You will pay a lender to solve the first. You can fix the second yourself, this quarter, for free.