As we progress through the final quarter of 2023, the financial landscape continues to witness transformative shifts, embracing innovative alternative financing methods like invoice factoring. Small and medium-sized enterprises (SMEs) are increasingly drawn to these alternatives, seeking capital without the confines of conventional borrowing. In this dynamic environment, compliance remains a focal point, given the surge in disclosure laws and heightened regulatory oversight. 

State-Specific Compliance Considerations 

California SB 1235 22800-22805  

As of December 9, 2022, California Senate Bill 1235, integrated into Division 9.5 of the California Financial Code (Cal. Fin. Code §§ 22800 to 22805), imposes rigorous disclosure requirements for providers of commercial financing, including invoice factoring. Specifically, the final regulations issued by the California Department of Financial Protection and Innovation (DFPI) mandate that, at the time of extending a commercial financing offer, companies engaged in factoring transactions must deliver comprehensive “cost of credit” disclosures to applicants whose businesses are primarily directed or managed from California. The detailed requirements include column-by-column and row-by-row disclosure formatting. As well as electronic signature provisions, and rules for determining the applicability of statutory exemptions for transactions not exceeding $500,000.  

The disclosed information must cover annual percentage rates (APRs) and category-specific rules for calculating or estimating APRs, finance charges, and itemizations of the amount financed.  

Additionally, obtaining the California Financing Law license via the Nationwide Multistate Licensing System (NMLS) is a prerequisite for individuals or companies engaged in commercial financing. This license serves a dual purpose, granting authorization as a finance lender, broker, or a combination of both. Following approval, the California DFPI typically issues licenses electronically, delivering them to the designated email address of the licensee. 

New York’s Commercial Financing Disclosure Regulations: Factoring Funders Navigate Compliance 

As of August 1, 2023, factoring lenders in New York face heightened compliance obligations under the recently enacted NYCRR 600 / SB5470 regulations. These rules mandate detailed disclosures for commercial financing recipients, specifically, those offered $2.5 million or less. Compliance entails precise adherence to disclosure requirements at the time of extending specific financing offers. Covering crucial aspects such as APR, finance charge rates, and financing amounts. Notable stipulations include exemptions for majority-owned subsidiaries of banks and credit unions. Mandatory disclosures are applicable only if the recipient’s business is primarily directed or managed from New York.

However, there are revised guidelines for broker compensation disclosures. Electronic signature procedures, aligned with the New York Electronic Signatures and Records Act, are now a crucial part of compliance. Factoring funders had to implement robust systems to ensure accurate and timely disclosures to meet the six-month compliance deadline. 

Utah’s SB183 Enacts Disclosure and Registration Requirements for Factoring Funders 

Effective since January 1, 2023, Utah implemented SB183. Unlike California and New York, Utah’s Commercial Financing Registration and Disclosure Act places emphasis on registration rather than an APR disclosure requirement. Commercial lenders in Utah are required to register as commercial loan providers with the Nationwide Multistate Licensing System and Registry (NMLS) and the Utah Department of Financial Institutions (DFI). The Act applies to commercial-purpose transactions of $1 million or less. Which covers commercial loans, commercial open-end credit plans, and accounts receivable purchase transactions. This encompasses typical merchant cash advance or factoring transactions.

Disclosures mandated by the Act include details on the total funding provided and disbursed, the total amount payable to the commercial lender, the total dollar cost of the transaction, payment details, prepayment costs or discounts, any broker payments, and a description of the methodology for calculating variable payment amounts and associated circumstances. Registration renewal is an annual requirement, due annually by December 31 each year. Governor Spencer Cox signed SB183 into law on March 24, 2022. 

Upcoming Disclosure Regulations: Florida & Georgia 

Both Florida CS-HB 1353 and Georgia SB 90, effective January 1, 2024, mandate disclosure for factoring providers engaging in commercial financing transactions. Florida’s Commercial Financing Disclosure Law (CFDL) applies to a broad spectrum of commercial loans, accounts receivable purchase transactions, and open-end credit plans with businesses located in the state. Notably, it lacks an APR disclosure requirement and, unlike some other states, does not incorporate specific Truth in Lending Act (TILA) provisions related to consumer loans. Disclosure requirements cover details like the total funds provided, disbursed, and payable, as well as the dollar cost of the transaction, payment terms, and prepayment information. 

In Georgia, SB 90 defines a provider as an entity completing more than five commercial financing transactions in the state annually, extending to those offering commercial financing products via an online platform under a written agreement with a depository institution. The disclosure requirements for SB 90 include specifics on the total funds provided, disbursed, and paid, as well as the dollar cost of the transaction, payment details, and prepayment considerations. Significantly, both Florida and Georgia lack a requirement for covered entities to register with the state. Florida’s statute, while somewhat less explicit, pertains to transactions “with a business located in this state.”

This suggests applicability to recipients with headquarters in Florida. Yet, potentially encompassing lending to businesses with a presence in the state. It is advisable to consult with legal counsel for guidance on the appropriate course of action. Factoring companies operating in these states should proactively prepare to comply with these regulations. This will ensure a smooth transition and alignment with the evolving legislative landscape. 

CapFlow Direct Line to Compliance Department 

If you have any questions on upcoming or existing disclosure laws, you may reach out to our compliance department. Dan Taylor, our Vice President of Compliance & Data Assurance, provides support and guidance on disclosure regulations so that you are well-prepared for any inquiries regarding pre-existing or upcoming disclosure laws pertaining to commercial financing. We strongly recommend reaching out for assistance and guidance via email at 

For many businesses, especially those in the manufacturing and distribution sectors, managing working capital can be a challenging endeavor. This is where factoring steps in as a powerful financial tool. Factoring plays a pivotal role in empowering businesses to seize opportunities, fulfill purchase orders, and fuel growth.  

The Basics of Factoring 

Factoring is a financial arrangement where a business sells its accounts receivables to a third-party company, known as a factor, at a discounted rate. This provides the business with immediate cash, rather than waiting for clients to make payments on their outstanding invoices. Factoring serves as a rapid infusion of working capital, allowing businesses to meet their operational expenses, invest in growth opportunities, and take on larger orders. 

Facilitating Large Orders with Invoice Factoring 

One of the primary benefits of factoring is its ability to enable businesses to fulfill larger orders that may have otherwise been beyond their financial capacity. When a substantial order comes in, a business might not have the capital on hand to cover the production and delivery costs. Factoring bridges this gap by providing an immediate injection of funds, ensuring that the order can be processed without delay. 

Reducing Financial Stress 

Cash flow constraints can be a major source of stress for business owners. Late payments from clients can disrupt operations and hinder growth plans. Factoring alleviates this stress by providing a consistent and predictable cash flow stream. This allows businesses to operate with confidence, knowing they have the financial resources to meet their obligations and seize opportunities as they arise. 

Enhancing Creditworthiness 

Traditional lending institutions often scrutinize a business’s creditworthiness before extending loans or credit lines. Factoring is not a loan, but it can indirectly improve a company’s creditworthiness. By converting receivables into cash, businesses can pay off existing debts, invest in growth initiatives, and improve their financial health. This, in turn, can make them more appealing to traditional lenders for future credit needs. 

Accelerating Business Cycles 

Factoring accelerates the cash conversion cycle, which is the time it takes for a business to convert its investments in inventory and other resources into cash from sales. By expediting the collection of accounts receivables, businesses can reinvest that capital back into the business more quickly. This swift turnaround helps maintain momentum and ensures that businesses can adapt swiftly to market changes. 

Expanding Market Reach 

Factoring can be particularly beneficial for businesses looking to expand into new markets or industries. It provides the financial flexibility needed to explore and penetrate untapped territories. With a steady flow of working capital, businesses can allocate resources to market research, product development, and marketing efforts, ensuring a successful entry into new markets. 

Invoice Factoring with CapFlow Funding 

In the competitive world of business, adaptability and financial resilience are essential for growth. Factoring emerges as a powerful tool that empowers businesses to seize opportunities, fulfill orders, and navigate through challenges. By unlocking the value of accounts receivables, factoring provides the working capital needed to drive expansion and innovation. It’s not just a financial transaction; it’s a catalyst for growth, enabling businesses to realize their full potential. As businesses continue to evolve, factoring will undoubtedly remain a key player in their journey towards success. For invoice factoring needs visit our website and contact us today at:

Invoice factoring has long been a favored option for unlocking working capital quickly. However, it’s important to remember that it’s not the only solution available. This article will delve into several alternative options for obtaining working capital, including revenue-based financing, term loans, and credit card splits. While invoice factoring remains a highly favorable choice, there are viable alternatives that may suit your business needs if approval is not granted. 

Revenue-Based Financing/Merchant Cash Advance 

Revenue-based financing (RBF), offers a flexible approach to accessing capital. In this model, a business borrows a lump sum amount. The repayment is determined as a percentage of future revenue. One significant advantage of RBF is that it aligns the interests of the funder and the business. The funder shares in the business’s successes and challenges, as repayments are directly linked to revenue. This can be an appealing option for businesses with fluctuating income streams or seasonal variations. 

What Are Term Loans and How Can They Benefit Your Business?  

Term loans are a traditional form of business financing. Essentially, a lump sum is borrowed and repaid over a fixed period, typically with interest. This product provides the advantage of predictability, as it usually has fixed repayment terms and interest rates.

Term loans are a versatile option, allowing businesses to invest in equipment, expansion, or simply to cover working capital needs. They are also suitable for longer-term projects and can help businesses establish a credit history. 

Credit Card Splits: Getting Funding Through Credit Card Transactions 

For businesses that primarily transact through credit card payments, credit card splits can be an innovative financing option. This model involves an agreement with a financing provider, who advances a lump sum based on projected future credit card sales. The business makes repayments as a percentage of daily credit card sales.

Credit card splits offer businesses a way to access capital quickly, without the need for collateral or a lengthy approval process. This can be particularly useful for retail and hospitality businesses with a high volume of credit card transactions. 

Choosing the Right Funding Option for Your Business 

While invoice factoring is often the preferred choice due to its simplicity and accessibility, there are valid alternatives available for businesses that may not qualify for this form of financing. The key is to assess your business’s specific needs, cash flow patterns, and risk tolerance. 

Consider the Following Factors When Choosing a Financing Product 

Cash Flow Patterns 

Evaluate whether your business experiences seasonal fluctuations or if your revenue is relatively stable throughout the year. 

Risk Tolerance 

Determine how comfortable you are with sharing a portion of your future revenue, or if you prefer the predictability of fixed-term loans. 

Type of Business 

Consider if your business primarily transacts through credit card payments or if it relies heavily on invoicing. 

While invoice factoring remains a highly favorable option for obtaining working capital, it’s essential to be aware of the alternatives available. Revenue-based financing, term loans, and credit card splits offer viable solutions for businesses that may not qualify for invoice factoring. By understanding the unique advantages of each option and considering your business’s specific needs, you can make an informed decision to support your growth and financial stability. 

Small and medium-sized businesses often face the challenge of managing their cash flow effectively. This is where financial solutions like invoice financing and invoice factoring come into play. Both options provide a way for businesses to access the funds tied up in their outstanding invoices, but they operate in distinct ways. In this article, we will delve into the differences between invoice financing and invoice factoring to help you make an informed decision for your business. 

Invoice Financing: A Quick Overview 

Invoice financing, also known as accounts receivable financing, is a funding solution that allows businesses to borrow money against their outstanding invoices. In this arrangement, a financial institution (often a bank or an online lender) advances a percentage of the invoice value, typically ranging from 70% to 90%, to the business. The remaining amount, minus a fee, is paid once the customer settles the invoice. 

Advantages of Invoice Financing 

Maintain Control: With this service, businesses retain control over their sales ledger and customer relationships. They are responsible for collecting payments from their customers. 

Flexible: Invoice financing is often more flexible, as it can be used on a selective basis. Businesses can choose which invoices to finance, allowing for greater control over cash flow. 

Confidentiality: It can be a confidential arrangement. Customers may not be aware that a financing company is involved, as the business maintains the responsibility for collecting payments. 

Invoice Factoring: A Quick Overview 

Invoice factoring, on the other hand, is a broader financial service that involves selling your accounts receivables to a third-party factoring company. The factoring company then takes over the responsibility of collecting payments from your customers. They typically advance 70% to 90% of the invoice value upfront and release the remaining amount, minus their fee, once the customer pays. 

Advantages of Invoice Factoring 

Outsource Credit Control: Invoice factoring allows businesses to outsource the credit control process. This can be a significant relief for businesses that struggle with collections. 

Improved Cash Flow: By receiving an advance on outstanding invoices, businesses can improve their cash flow, allowing them to cover expenses, invest in growth, or seize new opportunities. 

Risk Mitigation: The factoring company often assumes the credit risk, meaning they are responsible for collecting payments. This can protect your business from losses due to customer defaults. 

Choosing the Right Option: Invoice Financing or Invoice Factoring? 

The decision between invoice financing and invoice factoring depends on your business’s specific needs and preferences. 

Use Invoice Financing if: 

You want to maintain control over customer relationships and collections. 

You prefer a more flexible arrangement and want to choose which invoices to finance. 

Use Invoice Factoring if: 

You want to outsource credit control and collections. 

You want to mitigate the risk of customer defaults. 

Remember to carefully assess the costs, terms, and conditions of both options, as fees and interest rates can vary widely between providers. 

In conclusion, both services provide valuable solutions for managing cash flow and accessing working capital. Understanding the key differences will empower you to make the best choice for your business. Whether you opt for invoice financing or invoice factoring, both can be instrumental in ensuring the financial health and growth of your enterprise. 

Small businesses often face unique challenges when it comes to managing their finances and maintaining steady cash flow. One financial tool that has proven to be invaluable for many small businesses is the small business line of credit. This flexible financial instrument can provide businesses with the necessary working capital to navigate various financial hurdles and seize growth opportunities. In this article, we will delve into the concept of a small business line of credit, its benefits, and how it differs from other forms of financing.

Understanding the Small Business Line of Credit

A small business line of credit is a financial arrangement provided by banks, credit unions, or alternative financing companies, offering businesses access to a predetermined amount of funds. Unlike a traditional term loan, where a lump sum is borrowed and repaid over a fixed period, a line of credit offers businesses ongoing access to funds within a certain credit limit. Think of it as a credit card for your business but with a higher credit limit and often lower interest rates.

Benefits of a Small Business Line of Credit


One of the primary advantages is its flexibility. Businesses can draw on the funds as needed, whether to cover unexpected expenses, manage seasonal fluctuations, or invest in growth opportunities. This adaptability allows businesses to have access to funds without committing to a fixed repayment schedule until the funds are utilized.

Steady Cash Flow

Maintaining consistent cash flow is essential for any business’s survival and growth. This product can act as a safety net, ensuring that businesses have access to funds even when revenue streams fluctuate. This prevents disruptions in operations and helps businesses meet their financial obligations on time.


Lines of credit often have lower interest rates compared to other forms of short-term financing, such as credit cards. The borrower incurs interest only on the amount borrowed, not the entire credit limit. Using and repaying funds promptly can lead to cost savings.

Building Credit History

Responsible use of a line of credit can contribute to building a strong credit history for your business. Timely repayments and prudent financial management can boost your business’s creditworthiness, which can be beneficial when seeking larger loans or negotiating better terms with suppliers.

Quick Access

In times of urgency, having a line of credit readily available can be a lifesaver. Traditional loan applications can take time to process, while a line of credit provides quick access to funds when needed most.

Key Differences from Traditional Loans

Repayment Structure: Traditional loans come with fixed repayment schedules. In contrast, a line of credit offers more flexibility. As you repay the borrowed amount, your credit limit is replenished, allowing you to borrow again.

Interest: Interest is only charged on the amount of funds you’ve used from the credit line, not the entire limit. This can result in lower interest costs compared to a traditional loan.

Usage: While traditional loans are often earmarked for specific purposes (e.g., equipment purchase, real estate), a line of credit can be used for various business needs, providing greater versatility.

Application Process: The application process is typically less rigorous and time-consuming than that of a traditional loan. Lenders evaluate factors such as your business’s creditworthiness, cash flow, and financial history.

Invoice factoring serves as a powerful financial tool for businesses aiming to maintain a robust cash flow. To maximize the benefits of this service, it is imperative to comprehend the multifaceted underwriting process to get approved. This process encompasses a myriad of critical factors, including risk review, UCC check, due diligence, and other essential considerations. In this article, we will delve into these underwriting guidelines, providing businesses with expert insights to make informed decisions when selecting an invoice factoring partner. 

Risk Review: A Comprehensive Assessment 

The initial phase of the underwriting process involves a meticulous risk review of the applicant. This involves evaluating various facets of the applicant’s financial health, creditworthiness, and business history. The factors considered include: 

Credit History and Score 

Funders may review the applicant’s credit history and score. A positive credit history and high credit score indicate lower risk for the factoring company. However, a positive credit hisotyr 

Business Performance Metrics 

We critically analyze the performance metrics of the applicant’s business. We thoroughly examine key indicators such as revenue trends, profitability margins, and growth trajectory.

Industry-Specific Considerations 

Understanding the nuances of the industry in which the applicant operates is imperative. Certain industries may carry higher risk profiles. 

Profit Margins and Debt Obligations 

Assessing the profit margins and existing debt obligations provides insight into the financial health, stability, and capacity to manage additional financing. 


UCC Check: Establishing Security Interest 

Conducting a UCC (Uniform Commercial Code) check is a standard procedure in invoice factoring underwriting. This step entails a comprehensive search of the UCC records to ensure there are no existing liens or claims against the applicant’s accounts receivable. Establishing clear security interest is crucial, especially in the event of default. 


Due Diligence: Verifying Invoices and Customers 

Due diligence is an intricate process that involves validating the authenticity of the invoices and scrutinizing the creditworthiness of the customers. This step is pivotal in preventing fraud and ensuring that only legitimate invoices are factored in. 

Invoice History and Aging

We closely examine the historical track record of invoices. This includes assessing payment patterns, any prior disputes, and the overall aging of the accounts receivable. 

Customer Creditworthiness and Payment History

The creditworthiness of the customers listed on the invoices is rigorously assessed. Additionally, their payment history with the applicant is analyzed to gauge their reliability. 

Verification of Goods or Service Delivery

In industries involving the provision of goods or services, confirmation of delivery or completion is often a prerequisite. This step actively prevents fraud and ensures that only legitimate invoices are factored in.


Terms and Conditions: Establishing the Agreement 

Post the underwriting process, the factoring company presents the terms and conditions of the agreement. This encompasses various crucial elements, including: 

Advance Rate and Reserves

The company defines the advance rate as the percentage of the invoice amount provided upfront, while also determining the portion held back as reserves. Finally, the customer pays this reserved amount once they fulfill their payment.

Factoring Fee Structure

The fee structure outlines a percentage of the total invoice amount. This encompasses any additional charges or discounts applicable. 

Notification and Reporting Requirements

Clear communication protocols for updates on new invoices, customer payments, and any changes in circumstances are established. 

Ongoing Monitoring: Sustaining a Strong Partnership 

Beyond the underwriting phase, maintaining open and transparent communication with the factoring company is very important. Providing regular updates on new invoices, customer payments, and any pertinent changes ensures a seamless and efficient factoring process. 

Amid evolving global and local market dynamics, the staffing industry is facing the crunch of margin compression, directly impacting payroll funding and factoring models. This transformation prompts industry players to reassess and adapt to the shifting landscape. 

Staffing Industry: A 2023 Overview 

While remaining a linchpin in the global economic framework, the staffing industry has recently encountered many formidable challenges. The U.S. Bureau of Labor Statistics unveiled 8.8 million job openings in July 2023, signifying an 8.2% increase from the prior year. This scarcity of available talent has sent ripples through sectors like transportation, manufacturing, and construction, sparking concerns about recruitment and retention. 

Adding to these challenges is the phenomenon of margin compression. This is driven by increased competition, costs that cannot be passed on to customers, or a lack of transparency. These factors have culminated in slimmer profit margins for staffing agencies. Coupled with client demands for lower prices, this has placed a strain on the financial stability and growth prospects of these firms. 

Macro Trends Amplifying Margin Compression 

Several overarching trends are amplifying the complexities of margin compression in the staffing sector: 

Escalating Labor Costs: Governments advocating for higher minimum wages are driving up labor expenses for staffing agencies. This particularly impacts low-margin industries, contributing significantly to margin compression. 

Surge in Competition: The industry is experiencing an influx of new firms, freelance platforms, and technology-driven staffing solutions. This heightened competition leads to diminished pricing power, further tightening margins. 

Regulatory Adjustments: Evolving labor regulations, including changes to overtime rules and healthcare requirements, necessitate costly adaptations by staffing agencies. This, in turn, amplifies margin pressure. 

Impact on Payroll Funding and Factoring Models 

Reduced margins at staffing firms reverberate directly through payroll funding and factoring companies. Shrinking profit margins can impede steady cash flow, potentially affecting timely payroll commitments. This can lead to selective invoice purchases and less favorable terms. Factoring companies may face increased risk due to the financial instability of their staffing clients. Moreover, diminished revenues can curtail investments in sales, marketing, and productivity enhancements. 

Mitigating Risks Through Invoice Factoring 

Staffing agencies can employ various strategies to mitigate the risk of higher default rates during margin compression: 

Prudent Customer Screening: Establishing robust client relationships ensures timely invoice payments, reducing default risks. Agencies should vet clients for a history of punctual and full payments. 

Optimizing Operations for Increased Margins: Streamlining operations, from recruitment processes to negotiating better rates, can bolster profit margins, thereby reducing default risks. 

Effective Risk Management: Regular financial audits and tailored risk mitigation strategies are essential to identify and address potential threats promptly. 

Looking Ahead: Navigating the Future

Given recent developments, factors must prioritize rigorous risk management. Close monitoring of staffing agency clients’ financial health and flexible underwriting standards are crucial. Additionally, providing support in cash flow management becomes paramount. 

As the staffing industry grapples with margin compression, adaptability is key to survival and prosperity. Exploring operational efficiencies, investing in technology, and renegotiating terms with clients are potential strategies for staffing agencies. Simultaneously, factoring firms may need to recalibrate their risk models to accommodate the increased financial instability of their staffing clients. 

In the face of margin compression, the staffing industry’s resilience and adaptability presents a promising path to continued success in an ever-changing global economy. By understanding and adapting to the evolving landscape, staffing, and factoring firms can not only weather these challenges but also transform them into growth opportunities.