Invoice Factoring Explained

→ How does invoice factoring work, and what does it cost? → Where does traditional factoring fall short? → What changes when invoices move onchain? → How do the options compare? → How do we finance an invoice? → What stays the same? → Frequently asked questions

The Office of the Comptroller of the Currency defines factoring as "a type of financing in which a business sells its accounts receivable invoices to a third party at a discount." You will also see it called accounts receivable financing. Three parties are involved. The business that did the work sells the invoice, the factor advances the cash and collects payment, and the customer pays the invoice when it falls due. It is used well beyond trucking. The U.S. Chamber lists manufacturing, wholesale and distribution, trucking and logistics, staffing, security and healthcare among the industries that use it. To qualify, the seller must be free of liens and legal problems, and its customers need good credit. The appeal is simple: the work is done and the invoice is real, but the cash is weeks away, and payroll, fuel and suppliers do not wait that long. Here is how it runs. 1. Invoice. The business delivers goods or services and invoices its customer. 2. Sale. It sells the unpaid invoice to a factor. 3. Advance. The factor pays part of the value up front. 4. Collection. The factor collects from the customer and passes on the balance, less its fee. Take a $10,000 invoice at the Chamber's example rate of 1% per month. If the customer pays in one month, the fee is $100. If the customer takes three months, it is $300. The business also gets only part of the invoice up front, because advances usually fall below the full amount. Factoring comes in two forms. With recourse, the business covers any amount its customer refuses to pay. Without recourse, the factor absorbs that loss, and the Chamber calls this the more expensive version. It adds that factoring costs more than a traditional line of credit and that finance companies may contact the business's customers.

The first advance can be quick. Four other things are harder to fix. The wait. The factor is repaid only when the customer pays. A 2017 TransCredit survey reported by Transport Topics put truckload shippers at 39 days on average, and Procter & Gamble moved its terms from 75 days to 120. That survey is old, so read it as a pattern, not today's average. DAT currently says invoices often take 30 to 90 days. The cost. The Small Business Administration explains that factoring lines are priced by discounting the invoice by a percentage. Freight margins are thin: the American Transportation Research Institute puts the average cost of running a truck at $2.336 per mile in 2025. The visibility. ICC United Kingdom calls duplicate financing, the same transaction financed more than once, a fraud "impossible to detect via existing siloed AI and KYC tools." When every lender keeps its own books, nobody sees the whole picture. The rails. The Federal Reserve plans to extend Fedwire to Sunday and weekday holidays no earlier than 2028. Until then, bank transfers follow a banking calendar. Demand is not the constraint. The Asian Development Bank estimates the global trade finance gap at $2.5 trillion in 2022, up from $1.7 trillion in 2020. That figure covers import and export finance, not factoring alone, but it shows how much need the current system leaves unmet.

Two things change: when money can move, and who can see the record. When money moves. The ethereum.org documentation describes applications that run 24/7 and a new block roughly every 12 seconds. Blockchain networks do not follow a banking calendar. Who can see the record. Each invoice becomes a token whose terms, status and remittance are written to a shared ledger. Participants check one record instead of asking each lender for theirs. Tokenization is the step that makes this work: the token carries its own terms, so a pool can finance it and anyone with access can see where it stands. It does not make a customer pay sooner. What it removes is the gap between an invoice being approved and the business holding cash.

Three ways to turn an invoice into cash. Descriptions of other providers come from their own websites in October 2026.

The three are not interchangeable. A traditional factor suits a business that wants one relationship and a person to call. An asset platform suits an issuer packaging many kinds of asset for investors. An invoice pool suits a business or institution that wants each short-term invoice financed and checkable.

Bulla Network is a protocol for creating decentralized liquidity pools and enabling onchain invoice tokenization. Here is the path an invoice takes with us. 1. Register. The business registers for a pool. 2. Approve. The pool manager authenticates and approves the invoice. 3. Mint and submit. The approved invoice is minted as an onchain claim and submitted to the pool. 4. Finance. The pool finances it at the terms agreed up front. The Bulla Dashboard shows where it stands. Three kinds of participant use a pool. Originators source and manage invoices. Institutions can own and customize a pool for the originators they back. Liquidity providers supply capital to pools that finance short-term business invoices. A pool can be deployed in any stable token. Our TCS Settlement Pool has financed freight invoices since August 2024. In April 2026 we announced a grant from Arbitrum DAO's Orbit-track Crypto Cities initiative to deploy a PYUSD pool on Arbitrum for freight finance.

Onchain financing changes how an invoice is funded and tracked. It does not change the basics of credit. Credit risk. A customer can still pay late or not at all. Each pool's terms decide who carries the loss. Visibility, not obligation. Onchain recording changes who can check an invoice. It does not change whether the customer owes it. Access. Pools admit eligible participants after qualification, under each pool's terms.

Q: What is blockchain invoice factoring? A: The same exchange, cash now for an unpaid invoice, run on a blockchain. The invoice becomes a token, a pool pays for it and the ledger keeps the history. Q: Who approves invoices in a Bulla pool? A: The pool manager for that pool. Q: Can an institution own a pool? A: Yes. It can customize the pool to finance the originators it backs. Q: Which stablecoins can a pool use? A: Any stable token, according to Bulla. The TCS pool settles in PYUSD on Arbitrum. Q: Where can I see an invoice's status? A: On the Bulla Dashboard. Q: Is onchain invoice financing risk-free? A: No. See the section above on what stays the same. This guide is general information, not legal or financial advice.

Office of the Comptroller of the Currency, Small Business Road Map, March 2020 (occ.gov) U.S. Chamber of Commerce, Understanding Factoring Receivables (uschamber.com) U.S. Small Business Administration, Asset-Based Lending: What Is the Upside and Downside, December 2017 (sba.gov) DAT, Essential Guide to Invoice Factoring for Truckers (dat.com) Transport Topics, Some Shippers Implement Longer Payment Policies, 2017 (ttnews.com) American Transportation Research Institute, New ATRI Report Details Accelerating Costs and Low Profitability Despite Cuts, July 2026 (truckingresearch.org) Federal Reserve Board, press release, October 9, 2025 (federalreserve.gov) ICC United Kingdom, We Can Stop Duplicate Financing Fraud This Year (iccwbo.uk) Asian Development Bank, 2023 Trade Finance Gaps, Growth, and Jobs Survey (adb.org) ethereum.org, What is Ethereum? and Blocks (ethereum.org) Centrifuge documentation, Concepts (docs.centrifuge.io) Bulla Network, protocol page, TCS Blockchain go-live announcement and Arbitrum DAO grant announcement (bulla.network)