Sometimes called “accounts receivable,” factoring refers to a transaction in which one business sells its invoices (accounts receivable) to a third party commercial financial company, which is also known as a factor. Using a factor allows businesses to receive cash more quickly than they would otherwise by waiting 30 to 60 days for a customer to pay the invoice. Each factoring company has different terms and natures, depending on the industry they are serving as well as their particular business model. Factoring is not a loan, and there is no limit to the amount of funds a business can receive through factoring, making it a good option for many businesses.

Top 10 Most Reviewed Factoring Companies

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What features matter most?

Fees

How much you pay for the services provided by a factoring company will vary from company to company. There are a few things to keep in mind as you’re comparing fees.

  • Overall fee: Some companies charge what is referred to as an overall factoring fee, which is determined based on your monthly volume along with how creditworthy your customers are.
  • Added fees: Some additional charges may incur for services performed outside of the direct transaction. Money transfers, shipping, collateral and other costs of doing business are commonly added on as fees. It’s important to ask about fees upfront so you aren’t surprised by a lot of add ons when you get your bill.
  • Repayment fees: The repayment fee structure will vary from company to company, and it’s important to understand upfront how much you will be expected to pay.

Payment timeline

How fast you can get money is the single most important factor for many startups and businesses when choosing a factoring company. Not every factoring company operates on the same timeline, which can have a big impact on how well they will suit the needs of your business.

  • Immediate: Some factoring companies have near-instant approvals, which means businesses have quick access to the cash they need. This might come with an additional cost, so make sure you understand the full payment structure before you sign up for immediate payment.
  • One to three days: Many factoring companies take one to three days to apply the first payment, and then they approve payments within 24 hours after that. Wire transfers generally take one to three business days, but these are done without charging an additional fee.
  • One week: Some factoring companies will take up to a week to give you your money. If a company isn’t upfront about their timeline, be sure to ask so you aren’t left waiting too long for your cash.

Company need

Different businesses have different reasons to use factoring company, which can change as their business evolves.

  • Cash flow: The main reason businesses use factoring companies is because they need the cash flow. This is especially true for startups and other new businesses, although established businesses may find they need help with their cash flow from time to time. Some businesses only use factoring for large invoices and let the smaller ones get paid normally.
  • Credit and collection services: Some businesses have a hard time getting clients to pay their invoices. New businesses, especially, may have a difficult time managing the process of collecting payments. Working with a factoring company who will do the heavy lifting of calling clients and following up on invoices can simplify the process and take a heavy burden off of a small business’s shoulders.
  • Lending troubles: Whether you’re a large or small business, factoring can help you get cash flow and keep growing if you are unable to qualify for a bank loan due to bad credit, recent bankruptcy or other reasons.

Industries

While all businesses can arguably benefit from factoring, there are some industries that are more likely to use factoring than others. Generally, industries that provide some form of good or service and frequently wind up waiting 30 to 90 days for an invoice to be paid are good candidates for factoring.

  • Transportation: Freight companies frequently turn to factoring since a large portion of their revenue depends on invoices paid by clients and customers. They might also be interested in taking advantage of fuel discounts, rewards programs and maintenance discounts that can be provided by some factoring companies.
  • Staffing: Staffing agencies often use factoring to help them since they do not get paid until after their clients have filled their position openings and the candidate has started working. Factoring can be a way to increase cash flow and keep the staffing business running.
  • Manufacturing: Manufacturing companies often find that big companies take a long time to pay them, which can place a heavy financial burden on the business. Factoring can be a good way to ease the burden and maintain cash flow while you’re waiting for a major invoice to get paid.

Amount funded

Factoring companies vary in the amount of money they are willing and able to fund a business at one time. The amount funded will depend on the size of the businesses that the factoring company supports and services.

  • Small businesses, including startups: Small businesses and startups can generally get as little as $5,000 or less from factoring companies. This can help small and startup businesses that need some extra breathing room and instant access to cash flow.
  • Mid-size businesses: Mid-size businesses may need small amounts of funding to larger amounts. They will want to look for a factoring company that can offer them a range from $5,000 to $250,000 so they can get cash for a range of invoices.
  • Large businesses: Large businesses may need $500,000 or more from a factoring company. They will want to find a factoring company that has options for high limit factoring to meet their specific business needs.

Privacy and confidentiality

Many businesses are concerned that their reputation will be damaged by using a factoring company. Therefore, many factoring companies have come up with different ways to keep their clients’ information confidential while still providing the collection and lending services they need.

  • Phone calls: Many factoring companies will use your company’s name when making and receiving phone calls so your clients don’t realize there is a third party serving as an intermediary. Make sure you trust the factoring company you are working with to be respectful to clients since they are acting on your behalf.
  • Mailing payments: It will be pretty obvious to clients if they suddenly need to start sending payments to a new business name. Many factoring companies have clients continue to send payments to your business name but with a new address.
  • Reporting: You want to work with a factoring company that allows you to constantly monitor your account so you can easily keep track of all reporting and activity, even when you’re out of the office.

What are different types of factoring companies?

Recourse (discount) factoring

Recourse factoring means the client ultimately takes responsibility for paying the invoice. This means you, as the client, end up paying the full amount to the factoring company in the event that your customer doesn’t pay the invoice.

Non-recourse (traditional) factoring

Non-recourse factoring enables companies to sell their invoices to the factoring company. The factoring company then assumes all of the credit risks for the collection of the invoice. This protects your business from credit loss.

Who's it for?

Startup businesses

Startups need cash flow to get their business up and running, and factoring can be a great way for them to keep their cash flow up as their business gets going. Instead of waiting around for customers to pay their invoices, startups can get the cash they need almost instantly, which they can use to invest in the business and help it grow.

Small businesses

Small businesses may need help with cash flow, even if they are established. They also might have smaller invoice amounts than larger businesses and will need to work with a factoring company with a low enough minimum to meet their needs.

Large businesses

Large businesses still need help getting cash flow from time to time, even if they are established. They will need a factoring company with high limits to meet their high invoice demands. They also will likely want a factoring company who is flexible in how often they use their services.

Advisors

Financial advisors can build value with their clients by partnering with some factoring companies. Many factoring companies offer rewards and other incentives to advisors who bring them business.

Company reviews

  • Fundbox

    Fundbox is a factoring company with an online platform that helps businesses of all sizes get payment for their invoices quickly. Their investors include innovators of technology and finance who help Fundbox get businesses the money they need to keep their businesses growing.

    • Best for Fundbox is best for startups, small businesses and advisors.

  • Apex Capital Corp

    Apex is a factoring company specifically for the freight industry. They have been helping freight companies get the money they by providing up-front funding since 1995 and offer both recourse and non-recourse factoring for their clients.

    • Best for Apex is best for owners of large and small freight businesses.

  • United Capital Source

    United Capital Source has provided over $100 million to small businesses through loans, including accounts receivable. Headquartered in New York City, NY, they serve established businesses in a variety of industries across the United States.

    • Best for United Capital Source is best for established small and large businesses.

  • Triumph Business Capital

    Formerly called Advance Business Capital, Triumph Business Capital has provided invoice factoring services for over 5,000 small to mid-size businesses since it was founded in 2004. They are headquartered in Dallas, TX, and provide factoring for small to mid-size business in a variety of industries.

    • Best for Triumph Business Capital is best for small and mid-size businesses, especially freight brokers, trucking companies, oil and gas companies, staffing companies and government contractors.

  • Dealstruck

    Dealstruck combines traditional business loans, accounts receivable lines of credit, inventory lines of credit and other revenue-based loan products to empower businesses to achieve their financial goals. Their team custom-designs packages for each business, so you will only get the services that will benefit your business.

    • Best for Dealstruck offers lending solutions for businesses that have been established for at least one year, have good credit and earn at least $150,000 in annual revenue. Also, they offer customized solutions for a variety of industries.

  • Interstate Capital

    Since their founding in 1993, Interstate Capital has successfully funded over 8,000 companies and purchased nearly one billion dollars in invoices annually. They have locations in CA, TX and NM and provide service to thousands of companies across North America each year.

    • Best for Interstate Capital is best for small and large businesses.

  • Bluevine

    Based in Palo Alto, CA, Bluevine serves small businesses by offering them access to capital when they need it with speed, simplicity and transparency. Their services include a business line of credit and invoice factoring for a variety of industries, excluding the medical and healthcare industries.

    • Best for Bluevine is best for small businesses that are not in the medical or healthcare industry.

  • Gateway Commercial Finance

    Founded in 2007, Gateway is a full-service factoring company that works with businesses in a wide variety of industries. The company’s owners are also the managers, so clients will speak directly with a decision maker from the beginning for a quick and efficient factoring experience.

    • Best for Gateway is best for businesses of all sizes in all industries.

  • Crestmark

    Crestmark was approved as a Michigan-chartered bank in 1996 and is headquartered in Troy, MI. Crestmark is a business-to-business lender that specializes in providing diverse financial solutions. They offer recourse and non-recourse factoring for businesses across the country.


    • 1st Commercial Credit

      Established in 2001, 1st Commercial Credit is headquartered in Austin, TX. They have additional international locations in Toronto, Canada and London, England. 1st Commercial Credit offers funding solutions for a wide range of industries along with flexible funding requirements that are feasible for most businesses to qualify for.

      • Best for 1st Commercial Credit is best for business of all sizes, especially those that work with international clients.