Your business needs faster access to cash from outstanding invoices. You’ve been researching invoice factoring and the numbers in the marketing materials look manageable: 1-5% factor rate, relatively fast approval.
Then you read the contract details. You only receive 80-85% initially, with the rest held until your customer pays. Volume minimums. Late fees when customers pay slowly. Long-term commitment requirements.
Invoice factoring has been the standard solution for B2B cash flow for decades. But the tradeoffs (reserve holdbacks, monthly volume minimums, payment process changes and fees that compound when customers pay late) make it a poor fit for most B2B businesses that need faster access to cash.
Revenue On Demand™ offers a different approach. Now® is the home of Revenue On Demand, providing the same core benefit (turn invoices into cash) with more control, transparency and flexibility.
This article compares both options so you can decide which makes sense for your business.
How invoice factoring works
Invoice factoring companies purchase your invoices. You receive a portion of the money initially (typically 80-85%), they collect payment from your customer, then send you the remainder (minus fees) after payment arrives.
The process
- You apply and get approved (typically 1-2 weeks)
- You submit invoices for approval
- Factor advances 80-85% of invoice value
- Factor collects payment directly from your customer
- After customer pays, factor sends remaining 15-20% minus fees
Fee structure
The advertised rate often shows just one component of the total cost:
Factor rate: 1-5% of invoice value (the base fee you’ll see in marketing materials)
Late fees: Additional charges if your customer pays past the due date. According to Atradius, 55% of B2B invoices are overdue and businesses wait an average of 20 days past terms for payment. Late fees can be 1% for each additional 30 days the invoice remains unpaid. When invoices run 30-40+ days overdue, these fees compound significantly.
The “per month” cost issue: Factoring costs are often quoted as “3-5% per month.” This matters because if your customer pays 60 days late instead of on net-30 terms, you’re paying that monthly rate for three months instead of one. A 3% monthly rate becomes 9% total cost when an invoice that should take 30 days actually takes 90.
Other potential fees: Application fees, wire transfer fees, monthly minimum fees, early termination penalties
Requirements and limitations
Monthly volume minimums: Many factors require a $50K minimum in monthly invoice volume. If you have seasonal business or occasional large invoices rather than consistent monthly activity, you may not qualify.
Commitment requirements: Many factors require you to submit all or most of your invoices, not just select ones. You can’t choose which customers or which invoices to include.
Contract terms: 1-3 year commitments with auto-renewals are standard, often with penalties for early termination. For example, consider a business factoring $100,000 monthly on a 12-month contract. If they terminate after six months with a 3% early termination fee, they would pay $18,000 just to exit the contract.
Customer payment changes: Factors typically require payment directed to them rather than to you. This may require amendments to your preexisting contracts. Strong accounts receivable collection practices become even more important when working with factors who manage customer communications.
When factoring might make sense
Factoring works for a narrow set of circumstances:
Very large individual invoices ($10M+): Some factoring companies specialize in handling extremely large invoice amounts that exceed what Revenue On Demand processes.
Consistent sizable monthly invoice activity with predictable payment timing: If you have steady monthly volume that meets their minimums and your specific customers have demonstrated consistent on-time payment (not just industry averages), factoring becomes more viable. However, even one customer paying 30-40 days late can significantly increase your costs through compounding late fees.
How Revenue On Demand works
Now is the exclusive provider of Revenue On Demand. Now purchases your invoices for a flat fee. You receive 100% of the invoice value (minus the fee) within 24 hours of invoice approval. Your customer pays on original terms with only the remittance address changed.
The process
- You apply and get approved
- You choose which invoices to get paid on faster (full control, no minimums)
- Now purchases the invoice for a flat fee
- You receive payment within 24 hours of invoice approval
- Your customer continues to pay on original terms, remittance address changes to Now
- You stay involved throughout (included on all communications)
Fee structure
Flat fee: 2.75% for net-30 terms, scaling for longer terms
One-time activation fee: $250 (first invoice only)
No late fees: Fee stays the same regardless of when your customer actually pays. With 81% of businesses reporting an increase in delayed payments, this matters.
No monthly minimums, no wire fees, no application fees, no early termination penalties
The transparent pricing approach means you know exactly what you’ll pay before proceeding.
Requirements and flexibility
Minimum annual revenue: $750K+
Time in business: 1 year+
Client and customer evaluation: Revenue On Demand evaluates both your business health (including past bankruptcies and financial stability) and your customers’ creditworthiness. If you’re working with established B2B customers who have good payment history and your business is in good standing, you likely qualify.
No monthly volume minimums: Get paid faster on one invoice or twenty
No long-term commitments: Use it when you need it. Clients can exit at any time.
Full flexibility: You choose which customers and which invoices. Keep some on normal payment terms, get paid faster on others.
When Revenue On Demand makes more sense
You want control over which invoices to get paid faster on: Choose invoice-by-invoice rather than committing all receivables. Get paid within 24 hours of approval on large invoices to fund growth while keeping smaller ones on normal terms. Use it during seasonal peaks or only when you need faster access to cash.
You want transparent, predictable pricing: Know exactly what you’ll pay regardless of when your customer actually pays. The flat fee structure (2.75% for net-30, scaling for longer terms) plus the $250 one-time activation fee and 1% international surcharge are clearly disclosed. No surprise charges or compounding monthly fees.
You want access to your full invoice value faster: Get 100% of your invoice value (minus the flat fee) within 24 hours of invoice approval. Unlike factoring, there’s no 15-20% held back until your customer pays.
You value flexibility: Use Revenue On Demand when you need it – seasonal gaps, large projects, growth spurts – without monthly volume minimums or long-term commitments.
Side-by-side comparison
Feature
Invoice factoring
Revenue On Demand
Amount received
80-85% initially, 15-20% held until customer pays
100% (minus flat fee)
Fee structure
1-5% factor rate + late fees
Flat fee (2.75% for net-30), no late fees
Total cost when customer pays late
Compounds with monthly rate + late fees
Same flat fee regardless
Monthly volume requirements
Often $50K-$100K monthly minimums
No minimums
Flexibility
Must submit all/most invoices
Choose which invoices to get paid faster on
Payment process
Customer pays factor directly
Customer pays on original terms, remittance address changes
Contract term
Often 1-3 year commitment with auto-renewals
No long-term commitment
Early termination fees
Yes (e.g. $18,000 – see above)
None
Money held back until customer pays
15-20% held in reserve
None
Late payment fees
Yes, typically 2% per month
No
Compare all your options: Our free guide breaks down bank loans, lines of credit, factoring and Revenue On Demand side by side, including hidden costs most businesses miss.
Download “The Hidden Cost of Late Payments” guide
Key differences explained
The reserve holdback issue
With factoring, 15-20% of your invoice sits in reserve until your customer pays. This creates a cascading cash flow problem.
Example: You factor a $750K invoice with net-30 terms. You receive $637,500 initially (85%). The remaining $112,500 sits in the factor’s reserve account (minus fees). If your customer pays on time after 30 days, you’re still waiting 30 days to access that reserve. But with the average B2B invoice running 20 days overdue, you’re more likely waiting 50+ days.
But the problem compounds. Next month you factor another $750K invoice. Another $112,500 goes into reserve. By month three, you have $337,500+ tied up in reserves across multiple invoices, waiting for customers to pay.
Another scenario: A staffing company factors $2M in monthly invoices. At any given time, they have $300K-$400K sitting in reserves waiting to be released. That’s working capital they’ve earned but can’t deploy – money that could cover payroll for new contracts, fund expansion or handle unexpected expenses. When a large customer takes 50 days to pay on net-30 terms, a common occurrence, that specific reserve sits frozen for an additional three weeks while costs continue.
With Revenue On Demand, you get 100% of the invoice value (minus the flat fee) within 24 hours of invoice approval. A $750K invoice with 2.75% fee = $729,375 within a day of invoice approval. No waiting for reserves to be released.
How late payment costs add up
Factoring companies charge additional fees when customers pay late. With businesses waiting an average of 20 days past terms (and some invoices running 30-40+ days overdue), these fees hit frequently.
Example: $500K invoice with net-60 terms, customer pays 30 days late (90 days total)
Factoring costs:
- Factor rate (4%): $20,000
- Late fees (1 additional 30-day period × 2%): $10,000
- Total fees: $30,000
Revenue On Demand costs:
- Flat fee (5.25% for net-60): $26,250
- Late fees: $0
- Total fees: $26,250
The longer your customer takes to pay, the more factoring costs grow. Revenue On Demand fees stay the same regardless of payment timing.
Payment process considerations
Traditional factors typically require payment directed to them, which may require updating customer contracts depending on your existing agreements. Your customers receive communications from the factor regarding payment.
Revenue On Demand keeps the payment process simpler. Your customers continue to pay on the terms they agreed to. The only change is the remittance address – they send payment to Now instead of directly to you. You’re included on all communications.
For businesses with enterprise clients or government contracts where payment process changes may require approvals, this distinction can matter.
Flexibility and control
Factoring typically requires monthly volume minimums and committing all or most invoices. You can’t selectively choose which invoices to submit. If you have a seasonal business or occasional large invoices, this creates limitations.
Revenue On Demand gives you complete control. Submit one invoice or ten. Use it every month or only during busy seasons. Get paid faster on large invoices to fund specific opportunities while keeping smaller invoices on normal terms.
Example: A manufacturing company has five invoices outstanding: three for $75K and two for $400K. With factoring, they’d need to commit all five (or at least meet monthly volume minimums). With Revenue On Demand, they choose to get paid within 24 hours of approval only on the $400K invoices to fund a new contract, keeping the smaller ones on normal terms. Total flexibility.
Real cost comparison
Let’s compare actual costs on a typical invoice to see how the numbers work.
Scenario: $500,000 invoice, net-60 terms, customer pays 30 days late (90 days total)
Invoice factoring:
- Initial advance (80%): $400,000
- Factor rate (4% for net-60 terms): $20,000
- Late fees (1 additional 30-day period × 2%): $10,000
- Reserve released after payment: $70,000
- Total fees: $30,000 (6% all-in)
- Net received: $470,000
- Payment timing: $400,000 initially, $70,000 after 90 days
Note: This doesn’t include potential application fees, wire transfer fees or monthly minimum fees.
Revenue On Demand:
- Flat fee (5.25% for net-60): $26,250
- One-time activation fee: $250 (first invoice only)
- No late fees
- Total fees: $26,500 first invoice, $26,250 thereafter
- Net received: $473,250 (first invoice), $473,750 (subsequent invoices)
- Payment timing: Full amount within 24 hours of invoice approval
The difference:
- $3,250 more in your pocket with Revenue On Demand (even on first invoice)
- $70,000 more received within 24 hours of invoice approval (no reserve holdback)
- No late fees if customer pays slowly
- Full payment within 24 hours of invoice approval vs. split payment over 90 days
- Transparent pricing
The cost gap widens when customers pay even later. At 30 days past terms, factoring late fees can add significantly more to the total cost.
Common questions
Can I use both factoring and Revenue On Demand?
Yes, though most businesses find it’s easier to pick one approach. Many B2B businesses prefer Revenue On Demand for the ability to select individual invoices and maintain full flexibility.
What if I’m already in a factoring agreement?
Review your contract terms. Many factoring agreements have early termination clauses, though you may pay penalties. After your commitment period ends, you can switch to Revenue On Demand for more flexibility and control.
Is Revenue On Demand available in my industry?
Revenue On Demand works well for professional services, manufacturing, staffing and government contractors. If you’re a B2B business offering payment terms to creditworthy customers, it’s worth exploring.
How does qualification work?
Revenue On Demand evaluates both your business (including financial stability and any past bankruptcies) and your customers’ creditworthiness. The process typically takes 1-2 business days once you submit required documentation. If your business is in good standing and you’re working with established B2B customers who have good payment history, you likely qualify.
Making your decision
The right choice depends on your specific situation and priorities.
Choose factoring if:
- You have very large individual invoices ($10M+)
- You have high-value invoices every month without seasonal gaps, and your customers consistently pay on time
Choose Revenue On Demand if:
- You want to maintain control over which invoices to get paid faster on
- You prefer transparent pricing with no late fees or compounding monthly costs
- You want access to 100% of invoice value within 24 hours of invoice approval (no reserve holdback)
- You value flexibility without monthly volume minimums or long-term commitments
- You’re a B2B business doing $750K+ annually with creditworthy customers
For most B2B businesses, Revenue On Demand provides better control, flexibility and cost predictability. You get paid on your terms while maintaining full visibility into the process.
Want to dig deeper?
Download our free guide, The Hidden Cost of Late Payments, to see how payment delays impact B2B businesses and compare all your cash flow options.