Invoice Factoring for E-Commerce Businesses: Factoring B2B and Wholesale Receivables

When Factoring Applies to E-Commerce

Most e-commerce transactions are paid immediately—customers pay when they order. But some e-commerce businesses have significant B2B components: wholesale accounts, retail partnerships, corporate customers, or dropshipping arrangements with payment terms.

For these businesses, invoice factoring can accelerate cash flow by converting 30-60 day receivables into immediate working capital.

E-Commerce B2B Scenarios

Factoring makes sense for e-commerce businesses that sell wholesale to retailers with payment terms, supply corporate accounts (businesses buying for their operations), operate B2B marketplaces with invoiced sales, or have significant dropshipping or fulfillment partnerships.

How Factoring Works

You complete a wholesale or B2B order and invoice your customer. Instead of waiting 30-60 days for payment, you sell the invoice to a factoring company. They advance 80-90% immediately, then collect from your customer. When paid, you receive the remaining balance minus the factor's fee.

Factoring vs. Consumer E-Commerce Cash Flow

If your e-commerce business is primarily direct-to-consumer (customers pay at checkout), factoring offers limited benefit. Your cash flow challenge is inventory timing, not receivables.

In this case, lines of credit, inventory financing, or revenue-based financing typically provide better solutions for working capital needs.

Wholesale Growth Strategy

Factoring can enable wholesale growth that wouldn't otherwise be possible. Large retail accounts often require payment terms—Net 30 or Net 60 is standard. Without factoring, a $50,000 wholesale order ties up cash for 1-2 months.

Factoring lets you offer competitive terms while maintaining cash flow for inventory and operations.

Marketplace and Dropshipping Applications

Some e-commerce businesses operate as suppliers to larger marketplaces or dropshipping arrangements where they're paid on terms rather than per-order. Factoring these receivables smooths cash flow.

If you're supplying products to a major retailer's online marketplace with Net 60 terms, factoring bridges the gap between fulfillment and payment.

Factoring Costs

While annualized costs seem high, compare to the alternative: without factoring, you'd either need to fund inventory from reserves or pass on wholesale opportunities.

Choosing a Factor

Look for factors experienced with e-commerce or wholesale businesses. Key considerations:

• Advance rate: 80-90% is typical
• Fee structure: Flat vs. tiered rates
• Minimums: Monthly volume requirements
• Recourse terms: Your liability if customers don't pay
• Contract flexibility: Ability to factor selectively

Customer Relationship Management

With factoring, your B2B customers know you're using a factor—they receive payment instructions from the factoring company. This is standard practice in B2B commerce and rarely raises concerns.

If you're worried about perception with key accounts, discuss factoring openly. Most business customers understand it's a normal cash flow management tool.

Is Factoring Right for Your E-Commerce Business?

Factoring fits e-commerce businesses with significant B2B or wholesale revenue (not primarily D2C), customers who pay on terms (Net 30+), growth opportunities that require working capital, and the margins to absorb factoring costs.

For primarily consumer e-commerce, explore lines of credit, inventory financing, or revenue-based financing instead.