Glossary · pricing

Reserve

Also called factoring reserve, reserve account, holdback, availability reserve.

The portion of an invoice's face value a factor holds back at funding and releases, less fees, once the customer pays - or, in asset-based lending, an amount the lender deducts from availability.

Drafted with AI assistance and checked by a person. Its factual claims were verified against the sources listed at the end, by Find Me Funders research desk.

What it means

## In factoring
Advance rate and reserve are two halves of the same number: whatever percentage of an invoice is advanced, the remainder is the reserve. The factor funds the advance immediately and holds the reserve until the customer pays, then releases it net of the factoring fee and anything else it is owed.

What the reserve absorbs before the client sees it: factoring fees on that invoice and often on others, chargebacks and repurchases, misdirected payments, dilution from credit memos and short pays, and any other amount the agreement lets the factor recover. It is a netted balance, not a segregated deposit, and in a facility that is unwinding badly it is the first thing to disappear.

Some agreements also hold a minimum reserve floor across the whole facility, released only at termination and after a run-off period during which chargebacks can still emerge.

## In asset-based lending
The word means something different. An availability reserve is an amount the lender subtracts from the borrowing base to cover a risk it has identified - accrued unpaid payroll taxes, a landlord's lien in a state without a waiver, disputed items, a customer concentration. It does not hold your money; it reduces what you can draw. Lenders can usually impose or increase reserves in their discretion, which makes it a quiet way to tighten a facility without amending it.

Where this one catches people

A factoring reserve is not a deposit you are guaranteed to get back. It is the factor's first source of repayment for everything that goes wrong anywhere in the relationship, and it is netted rather than segregated. Businesses that plan around reserve releases as predictable income discover the dependency at exactly the wrong moment.

Worked through

Illustration. $100,000 of invoices factored at an 85% advance rate. $85,000 funds immediately; $15,000 sits in reserve.

The customer pays $96,000, taking a $4,000 credit for a short shipment. The factor's fee on the batch is $2,200. Release: $15,000 reserve, less the $4,000 dilution, less the $2,200 fee - $8,800 to the client. The business budgeted $15,000 and received $8,800, and the difference is not a fee dispute, it is how the mechanism works.

Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.

Where you will meet this term

Invoice Financing Payroll Financing Asset-Based Lending

Read next

Advance rateThe share of an asset's eligible value a funder will put up front, used in factoring, asset-based lending and… Borrowing baseThe pool of eligible collateral, each class multiplied by its own advance rate and reduced by reserves, that … DilutionThe gap between what a business invoices and what it eventually collects, caused by credits, returns, allowan… Invoice factoringSelling receivables to a third party at a discount for immediate cash, with the buyer taking over collection … OveradvanceFunding beyond what the borrowing base formula supports, extended as a temporary and usually discretionary ac… Payroll financingFinancing timed and sized to cover payroll for businesses that pay staff weekly but bill customers on terms, … RecourseThe funder's right to come back to the client when the underlying obligation goes unpaid - in factoring, the … RepurchaseThe client's obligation to buy an invoice back from the factor when it turns out to be disputed, ineligible, … RetainageA percentage of each construction progress payment withheld by the owner or general contractor until the proj…

Sources and checks

Every figure on this page traces to a document someone read, on a date. Where a check is past its review date it says so rather than passing as current.

  1. an 85% advance on 100,000 of invoices leaves a 15,000 reserve, and a 4,000 short-pay plus a 2,200 fee cuts the release to 8,800 example
    100,000 x 0.85 = 85,000 advanced, 15,000 reserve. Customer pays 100,000 - 4,000 = 96,000. Release = 15,000 - 4,000 - 2,200 = 8,800. Cross-check on total cash to the client: 85,000 + 8,800 = 93,800 = 96,000 collected - 2,200 fee. Internally consistent.
    Find Me Funders — Arithmetic recomputed and checked in review Verified against source Checked 10 Sep 2026 by Find Me Funders research desk

Reserve — common questions

What does reserve mean?

The portion of an invoice's face value a factor holds back at funding and releases, less fees, once the customer pays - or, in asset-based lending, an amount the lender deducts from availability.

Where does reserve catch people out?

A factoring reserve is not a deposit you are guaranteed to get back. It is the factor's first source of repayment for everything that goes wrong anywhere in the relationship, and it is netted rather than segregated. Businesses that plan around reserve releases as predictable income discover the dependency at exactly the wrong moment.

Is reserve the same as an interest rate?

Reserve is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.

Which products does reserve apply to?

Invoice Financing, Payroll Financing, Asset-Based Lending.

Is there a worked example of reserve?

Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.

What else should I read alongside reserve?

Advance rate, Borrowing base, Dilution, Invoice factoring, Overadvance.

Has this definition been checked?

Yes. Its claims were verified against the sources listed at the end of this page, and the reviewer is named.

Is this legal advice?

No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.

Can I suggest a term?

Yes — [email protected]. The glossary grows from what people are actually shown in contracts.