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The FACT is- ERC refund Claims CANNOT be “factored”.  Here’s why. But first, let’s take 2 minutes to cover the basics of factoring for those who may not be familiar.

Invoice Factoring is a form of financing which enables a B2B business owner to get an advance against an approved invoice for goods and services sold to a customer, paid for on terms, ie net 30 days, net 60 days, etc.

Factoring advances typically range from 70% to 90% of the invoice face value and is deducted from the invoice payment once received from their customer, less the factoring fee.

Once the business has been approved, three things are required to get an advance against an invoice:

  1. Must have a “credit-worthy” customer.
  2. Invoice with payment terms submitted once goods or services have been provided
  3. Invoice payment is “assigned” whereby the customer agrees to send directly to the lender.

Ok, so let’s see if ERC Refund Claims can meet these requirements:

  1. CREDIT-WORTHY CUSTOMER- To be sure, the IRS, or any federal government agency for that matter, is an “investment-grade” credit-worthy customer.
  1. INVOICE WITH PAYMENT TERMS- ERC refund claims are not based on services rendered to the federal government and are not invoiced. Payment is made based on submission of IRS Form 941X(s), approved on a quarter-by-quarter basis. Finally, while it would be GREAT to request payment terms for the refund, the fact is, it typically can take from 6 to 12 months to receive.

As a side note, I recently had a client with a $1.2million refund where it took approx. 3 months to get the $250K, and almost 12 months to get the $1million.

  1. ASSIGN ERC REFUND PROCEEDS- the FACT is, ERC refund payments CANNOT be assigned. Period. However they can be mailed to another address. In addition, and unlike Factoring, if the refund payment gets sent in error to the client, the IRS is not liable.

Needless to say, based on the above, “Factoring” is not an option. So what do you do now? After all, IT’S YOUR MONEY AND YOU NEED IT NOW! “

The “good news” is that you have two options. Let’s take a quick look at each:


Some lenders offer a 12-month, INTEREST ONLY term loan. Monthly interest payments range from 1.5% to 3% per month, based on credit underwriting. Converts to fully amortized term loan after 12 months. Pre-payment penalties can range from zero (ie only paying interest for exact months outstanding), to a minimum of 3 to 4 months.

Advance rates typically range from 60% to 75% of the ERC Refund Claim, based on the financial strength and cash-flow of the business to support monthly interest only payments. Balance of the refund claim paid upon receipt of payment from the IRS.

Good option potentially when refund check is expected in 90 days or less, subject to terms of pre-payment penalty.

Downside is some business owners may only be eligible for a lower advance rate as it is tied to the monthly interest payment their cash flow will support, REGARDLESS of the size of their ERC Refund Claim. In addition, most ERC term loans will have an origination fee which typically can range from 1% to 4%.

Lenders will also look at the IRS tax standing, and existing UCC filings. Some lenders may require a “carve-out” against the ERC refund payment , putting them in first position on the ERC Refund Claim ONLY.

Finally, many ERC term loan lenders will deduct the  ERC preparers invoice from loan proceeds, and pay the preparer directly, at the business owners request.


Another option for securing funding against an ERC refund Claim, is a flat rate advance with no payments. Sometimes referred to as an “asset-purchase” (by the way, ERC Refund Claims cannot be sold), the lender will provide a flat, lump sum payment typically between 70% to 90% of the claim amount, as a one-time payment.

Some others will also make an additional payment typically if payment is received from the IRS in 90 days or less, which could take the total high as 88%.

With an ERC Advance or “asset purchase”. There are no payments at all. Most lenders charge an origination fee which typically can range from  1% to 4%.

One of the major approval criteria, in addition to financial viability, are IRS OFFSETS related to taxes, from past due 941 taxes to tax liens, and in some cases, other UCC filings as well. While not necessarily a “deal killer” in every case, the lender will look at the amount of the ERC refund Claim in relation to outstanding taxes, and whether an installment agreement is in place, in making an approval decision.

Finally, many ERC Advance Purchase lenders will also deduct the ERC preparers invoice from loan proceeds and pay the preparer directly, at the business owners request.

Hope this helps!

Feel free to shoot us an email if you have any questions or need more clarification or details on any of the above.

Also, if you would like to schedule a no-cost consultation to discuss your eligibility and apply for financing, just click on the link below to schedule.

EFN is an ERC Financing Platform which work with some of the largest ERC Refund financing firms in the industry, who collectively have funded hundreds of millions of dollars in ERC claims for business owners all over the country.