The 4 Best Factoring Companies for Your Business

Which factoring company should you work with? Find out with this guide.
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What is a Factoring Company?

A factoring company—also known as an invoice factoring company, an accounts receivable factoring company, or even a factoring receivables company—is a third-party financial institution that offers businesses cash in exchange for ownership of the unpaid, outstanding invoices. After this transfer with businesses, a factoring company will typically take over collecting the invoice from a business’s customer.

Factoring companies help businesses open up their cash flow while they wait for customers to pay them for their services. Is this business loan type right for you? We walk through what invoice factoring is and who the best factoring companies are in this guide.

Check Your Factoring Options

The Best Invoice Factoring Companies

For a small business seeking quick financing to improve cash flow, invoice financing via a reputable factoring company can be a smart move. Most commonly, invoice factoring is done by factoring companies that buy your receivables at a discount, giving you instant cash. It’s important to note that true factoring companies don’t lend money, they buy the accounts receivable at a discount. 

However, there are many variations on the theme. Here’s a closer look at a list of factoring companies that you should consider working with—along with what they offer and how they differ.

BlueVine

BlueVine factoring loans are completely online and paper-free. This factor company offers simple, transparent terms and a fast, convenient funding solution to help business owners who have irregular cash flow or long payment cycles. BlueVine’s online solution gives small businesses factoring loans for their invoices, letting them get paid on day one for invoices due in 15 to 90 days.

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Why Work With BlueVine

  • Loan amounts are as low as $20,000 and as high as $2.5 million.
  • Fees are charged based on the time invoices go unpaid. BlueVine’s fees are charged as a discount rate, ranging from 0.4% to 1%.
  • 100% online application and funding experience.
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How This Factoring Company Works

Unlike traditional factoring companies, BlueVine factoring doesn’t fund past-due invoices, and its clients maintain control of customer relationships, handling all communications and collecting on invoices.

Serving small businesses in industries including manufacturing, wholesale and distribution, marketing and PR, staffing and IT, BlueVine differentiates itself from competitors by providing a debt-free solution. Since invoices are assets (revenue that has already been earned), the final payment from the customer when the invoice is due is the only payment that should be required.

BlueVine factoring integrates with popular accounting solutions including QuickBooks, Xero and FreshBooks, and even works for clients without invoicing or accounting software. As you build history, you can earn a discount on the standard rate. You can also save by paying advances back before their due date (the invoice due date plus a three-week grace period).

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BlueVine's Invoice Factoring Terms

Your first advance can be approved in as little as one day, subsequent advances within minutes. You receive 85 percent to 95 percent of the invoice amount within 24 hours, and the rest (minus standard fees of 1 percent per week) when your customer pays. Total advances are based on your credit line, which can range from $20,000 to $5 million.

Triumph Business Capital

Initially launched in 2004 by transportation and financial executives as a freight factoring company, Triumph Business Capital (formerly Advance Business Capital) now serves industries including oil and gas, manufacturing, staffing, security, wholesalers, distributors, business services and transportation. While it started out working with businesses as a trucking factoring company, its in-depth understanding of many more industries is a distinguishing feature of the company.

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Why Work With Triumph

  • Receive up to 90% of the value of unpaid invoices.
  • Funds deposited in bank account within 24 hours.
  • Take collection and back-office activities off your hands.
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How This Factoring Company Works

Clients send Triumph invoices as they are generated; Triumph processes and pays them within 24 hours in most cases, depositing payment (typically 90 percent of the invoice) directly into your business bank account. Triumph then forwards the invoice to your customer and collects. You get the remaining 10 percent (less a small fee) when the customer pays.

Clients appreciate that Triumph takes collection and back-office activities off their hands, while still maintaining professionalism towards their customers. Clients’ customers are always notified that Triumph will be handling invoices and collections, so there are no surprises. Meanwhile, clients can view their accounts on the secure website.

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Triumph's Invoice Factoring Terms

Skylar Lane, Vice President of Business Development at this factoring company, says low rates and flexibility differentiate Triumph from most factoring companies. “Being part of a large bank, we are able to offer a lower factoring cost,” explains Lane. Rates range from 1 percent to 4 percent depending on a company’s average A/R aging turn and the credit quality of its customer base.

“We also allow clients to factor as much or as little as they like,” says Lane. “We don’t put restrictions on our clients as others do in regards to monthly funding or monthly fee minimums.”


How Invoice Factoring Companies Work

If you need to be paid for your services right away, then you might approach a factoring company to help you get the cash that customers owe you through this company’s invoice factoring services.

If you were to work with a factoring company, you’d “sell” your outstanding invoice to the factoring company you chose to work with. In return for the sale, the factoring company typically advances you 50% to 100% (usually around 80%) of the value of the outstanding invoice in question.

In some factoring scenarios, the factor company will then take over collection of your customer’s invoice payment. Or, you’ll still be the one in contact with your customer, waiting to collect your customer’s payment.

In either case, when your customer pays up, you’ll receive the remaining amount of the invoice value the factoring company held in reserve—minus the fees the factoring company collects for each week it takes for your customer to fulfill the invoice.

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An Example of Working with a Factoring Company

Say you have an outstanding invoice of $100,000, and the factoring company you choose to work with advances you 85% of that invoice. This mean that you’ll receive $85,000 right away, and the invoice factoring company will hold that $15,000 in reserve.

Now, say it takes your client 2 weeks to pay their invoice—this will mean that the factoring company was charging fees on the reserve amount for 2 weeks. Usually, accounts receivables factoring companies charge about a 1% factor fee on the total value of the invoice each week it takes your customer to pay back, meaning that, in total, the factoring company will charge 2% on the total invoice amount.

Sometimes a factoring company will also charge a processing fee at the point of the sale, usually of around 3% of the total invoice amount, so let’s assume that the factoring company in question does charge a factoring fee of 3%.

With all fees considered, the factor company will end up taking 5% of the invoice value—or $5,000—from the reserve amount. When all is said and done, you’ll receive $10,000 back from the factoring company and a total of $95,000 of your $100,000 invoice.


Consider Invoice Financing Companies Over Factoring Companies

If neither of the two best invoice factoring companies sound like the right company for you, then you should consider a product that offers a slight variation on factoring financinginvoice financing.

Fundbox

Fundbox, while extremely similar to the other companies mentioned here, is not actually an invoice factoring company in that they provide invoice financing. They are, however, an option that business owners should definitely consider alongside factoring and might even be a better fit for you than traditional invoice factoring.

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Why Work With Fundbox

  • Customers can draw funds from just $100 up to your credit limit, which can be as high as $100,000.
  • Low fee rates start at 0.39% of the invoice value per week
  • Apply for financing in seconds, receive a credit decision in hours, and get access to funds as soon in as one business day.
  • Control of invoice collections.
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How Fundbox Works

Fundbox “[puts] control over the cash flow back in the hands of small business owners,” says co-founder Tomer Michaeli. You can sign up for an account in seconds—the registration process is all online and there are no long forms to fill out. Using Fundbox is easy, too. Just connect your Fundbox account to your business bank account, or your accounting software—Fundbox integrates with most popular platforms. If approved, whenever you want to access funds, just click to draw, and the funds transfer to your bank account as soon as the next business day.

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Fundbox Terms

Funding the full amount of the invoice, rather than a percentage, is a key difference between Fundbox and traditional factoring companies. Businesses repay principal, transaction fees and advance fees in 12 or 24 equal weekly payments. Or, pay off the principal early to waive any remaining fees. “Fundbox is more a credit line based on your invoices [than a factoring company],” Michaeli explains. “When you need cash, you can clear an invoice. When you don’t need it anymore, you can repay early without any costs.”

The Difference Between Invoice Factoring and Invoice Financing

While many in the small business lending space use the terms invoice financing and invoice factoring synonymously, technically speaking, an invoice factoring company works differently from an invoice financing company.

Put simply, the difference between an invoice factoring company and an invoice financing company is who owns the rights to the value of the outstanding accounts receivable.

Generally, an invoice factoring company will purchase the right to collect on your future accounts receivables. They’ll technically own the outstanding funds, and some (but not all) will take over the collection of the outstanding invoice because that factoring company owns them.

Invoice financing, on the other hand, is a process by which you borrow against the value of your outstanding receivables. Invoice financing companies give you a loan based on a percentage of the value of the outstanding invoice. You still own the invoice you’re due, but per your invoice financing agreement, you’ll have to repay the invoice financing company with the funds once your customer fulfills your invoice.

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Ensure That Invoice Factoring is Your Best Form of Financing

The other thing to think about when you’re evaluating factoring companies is whether or not this type of financing is your best option. Working with a factoring company will cut into your expected cash flow, and more often than not, the price you’ll pay will depend on how quickly your customers move, which can get unnerving.

If you need a bump in financing to help you overcome cash flow issues, be sure to consider the following small business loan options. Though there are many different types of small business loans for you to look into, your best contingency plans to invoice factoring will be other, short-term forms of small business financing.

So, let’s run through the three best types of short-term, quick-to-fund financing that work as ideal alternatives to accounts receivable factoring:

  • Short-term loans are loans 3 to 18 months in length with daily or weekly payments. Short-term loans are particularly good options for business owners who have short-term cash flow needs and not recurring problems dips in working capital. Short-term loans also offer a lump sum of capital, but are easier to qualify for than medium-term loans or SBA loans.
  • A business credit line is similar to a business credit card, except with direct access to cash. Business lines of credit are particularly good options for businesses who need to cover the ups and downs of seasonal cash flow. Business lines of credit vary in their size and interest rates, meaning they’ll also vary in their ease to qualify.
  • A merchant cash advance is a cash advance paid back with future credit card sales. Merchant cash advances do serve a necessary function, but they are the most expensive financing options available on the market. If you’re looking for invoice factoring companies for an easy approval process, then a merchant cash advance could be a fit: they’re the easiest small business financing products to qualify for.

Invoice Factoring Companies FAQs

Ask a Factoring Company These Questions Before Working with Them

If you’re looking for an invoice factoring company, chances are you’ve already decided that invoice factoring is the right financing solution for you.

If that’s the case, you want to make sure you’re choosing a factoring company that will be a partner to your business and help you combat any cash flow issues that come from outstanding invoices.

When evaluating any factoring company, be sure to ask the following questions to make sure you find the best one for your business.

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Will you require that I use an accounting software?

There are factoring companies, especially those with advanced technology, that might require you to use an accounting software to work with them. Be sure to ask this question first before proceeding with any one invoice factoring company.

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What percent of my outstanding invoice values will the advance be?

Every invoice factoring company will be able to advance you a certain amount of your outstanding invoice. Some will be able to advance more than others.

Make sure the company you choose to work with is concrete in their offer, as well that the advance solves your cash flow needs.

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What is your processing fee?

Most factoring companies will charge a flat fee out of the gate for advancing you the money. Remember, this is money you’ll never see, no matter how quickly your customer pays you back.

You need to make sure this fee is something you are comfortable with before proceeding.

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What is your fee per week that my invoice is outstanding?

Most factoring companies will charge you a particular fee for each week your invoice remains outstanding.

Now, not all companies are like this (such as Fundbox) but for those that are, you need to make sure the fee is something you can afford. As a part of this depends on your customer’s behavior, you want to make sure you’re not being overcharged. It is best to factor invoices with predictable payment patterns, but we know it isn’t always that easy.

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When do I have to pay the advance back?

Some factoring companies will require you to pay back the advance in a certain time frame.

Others will be repaid when your customer pays.

If you find yourself evaluating a factoring company that operates with a set payback period, make sure you know how you’ll repay the funds in case your customer is late with their own payment.

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Who will own the debt?

Some factoring companies will take over the collection of the invoice and own the debt outright. Others won’t. You need to figure out what type of invoice factoring company you’re evaluating and if this is the case.

Many business owners don’t like having strangers call upon their customers for outstanding payments. If you don’t want this either, make sure you’re only comparing scenarios where you will own the debt.

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How easy will it be for us to work together again?

The benefit of working with a factoring company is developing a lasting relationship.

Cash flow problems will come up again and it’s nice to have somewhere to go when they do.

Some factoring companies make it easier than others to work together again, so be sure to ask what that relationship would look like in the future.

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How closely will you work with my customers?

Some invoice factoring companies will play a heavy part in how your outstanding invoice is collecting. A factoring company could, for instance, handle 100% of the invoice collection.

This means that instead of you knocking on your customer’s door, the factoring company will be knocking on your customer’s door. This might be an uncomfortable arrangement for some business owners. If you don’t want your customers knowing you’re taking on financing, or you simply want to be your customers’ only point of contact, it’s best to work with a factoring company that’s out of the picture when it comes to collection.

Before you commit to working with a factoring company, let’s cover some frequently asked questions about factoring companies in general.

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What are freight factoring companies for brokers?

Freight brokers connect companies who have goods they need to move with shippers who can move those goods. So, freight factoring companies for brokers simply offer invoice factoring services to freight brokers. Often times, customers will take a while to pay up for freight services, so freight factoring companies for brokers answer this widespread need with a valuable solution.

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What kinds of businesses can work with factoring companies?

Any company with a B2B (business-to-business) model that invoices their clients can be eligible for a factoring company. Some industries that often use invoice financing are trucking, transportation, manufacturing, wholesale, and oil and gas businesses. On the other hand, because many factor companies won’t work with other financial entities, finding a factoring company for brokers for financial deals might be tough.

While factoring companies will work with most types of businesses that invoice other businesses, they might not work with businesses who have invoices that last past 90-day terms. The theory behind this is that a customer is much more likely to pay closer to the date they were invoiced than 90 or 120 days past the invoice was issued.

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How does invoice factoring compare to other types of financing?

Invoice factoring is technically not a business loan, like most other types of business financing are.

With invoice factoring, the factoring company is purchasing your outstanding invoice. With other types of financing, a lender is lending you money to use for your business.

And of course, with invoice financing, you’re financing your outstanding invoices specifically. Other types of business loans will have other, more general uses and purposes.

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How many invoices can I factor?

The answer to this question will largely depend on the factoring company you’re working with. Some factoring companies will let you factor as many invoices as you’d like, some will just factor each invoice at a time.

You can also choose to factor (or not factor) invoices depending on your businesses needs. In some scenarios, for instance, it might make sense to only factor invoices to customers that take an especially long time to pay.

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What are the fees and rates that typically come with invoice financing?

The exact fees you’ll get with a factoring company depends on the company you’re working with. But in general, factoring companies charge a 1% to 3% factor fee on the total invoice amount each week it takes your customer to pay their invoice.

Many invoice factoring companies also charge a processing fee once you start working with them, usually around 3% of the total invoice amount. All in, invoice factoring could range from 10% to 65% APR, depending on your qualifications as a borrower. If you want to become more familiar with rates on invoice financing, check out our invoice factoring calculator

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What are the minimum requirements for working with a factoring company?

The first requirement for any factoring company will be that your business needs to operate under a B2B model, invoicing other companies.

Beyond that, invoice factoring companies care less about the nitty-gritty details of your business.

Because the deal is collateralized by the value of your invoice, factoring companies care less about your revenues, profitability, or time in business.

The maximum amount you can qualify for depends on the value of your invoice and the customer you’ve invoiced.

That’s right—because factoring companies depend on the fact that your customer will end up paying the invoice, they’ll care about who your clients are (and how creditworthy they are).

Factoring companies will also likely look at your personal (and business) credit report, too.