Best Invoice Factoring Companies

Businesses need continuous income to operate and grow, but unpaid invoices can create significant cash flow problems and restrict your business. Many businesses don’t have the staff time or resources needed to continuously follow up on outstanding invoices. When you work with an invoice factoring company, that company will do the hard work of getting those invoices paid. The company will also often offer you an advance on those balances, so you don’t have to wait to get paid. Our team of financial experts reviewed and ranked the top invoice factoring companies to help you get funded.”

It’s important to choose an invoice factoring company that’s right for your business. As you explore your options, you’ll need to consider multiple elements when weighing the pros and cons of each company and deciding if it meets your business funding goals and needs. Our experts used the following factors to rank the best invoice factoring companies.

• Loan Features: What are the invoice factoring terms? How long will the company attempt to collect on your invoices?
• Application process - How complicated is the application, and how much documentation do you have to provide? How quickly are applications approved, and when will you receive an advance?
• Factor rates and fees - Are the company’s factor rates competitive? These rates can have a major impact on the money you collect, especially if that collection takes time. What percentage of your balance will the company offer as an advance?
• Qualification process - Do you need a minimum credit score to apply? What other qualifications do you need to meet, like a business history, invoice balance amount, or invoice type requirement?
• Customer support - Can you get help from a live customer service representative? Is multi-channel support available, and are there supplemental information and tools available to help you?
• Online user reviews - What are other customers saying about the company on independent review sites like Trustpilot?

Best Invoice Factoring Companies - Full Overview

If you’re thinking about invoice factoring for your business, you’ll want to consider these top invoice factoring companies.

Best Invoice Factoring Companies

What Is Invoice Factoring?

Invoice factoring describes the sale of unpaid invoices to another company as a means to cover business obligations and address problems caused by slow-paying customers. In essence, lenders are buying those invoices from you, usually at a healthy discount, in exchange for cash. Once the bills are paid, the invoice factoring company gets paid the cash.

If a discount approach is not employed, the invoice factoring company charges a percentage-based fee on the aggregate amount of the invoices. Usually, it is applied upon receipt from the customer.

How Does Invoice Factoring Work?

When you apply to an invoice factoring company, you’re essentially selling your accounts receivable to that third party, with a promise to repay the fronted money, along with an additional fee, upon collection. This fee can be anywhere from 0.05% to 5.00% on average.

For example, if you sell $10,000 of invoices with a fee of 2.00%, you’ll pay $200 in charges, when you repay the outstanding balance. Some invoice factoring companies will chase the debts for you, while others expect you to handle invoice collection.

This type of funding is specifically designed for businesses that have cash flow issues, which oftentimes stems from late-paying clients. It enables organizations to stabilize their cash flows and continue operations as normal.

Most lenders will offer between 80.00% and 100.00% of the total value of your outstanding invoices. You should bear in mind that the percentage fee will be on the value of the total invoice, regardless of how much you borrow. For example, the factoring company may only lend you up to 80.00% of a $10,000 invoice and charge a 2.00% fee. This means you only receive an $8,000 loan but will be charged a fee of l $200, not $160.

Invoice Factoring Rates and Fees

Fees, interest rates, and charges for invoice factoring can be a little daunting to grasp, especially for newcomers. You’ll typically face the following costs:

• Factoring fee - This is the percentage of your invoices that the factoring company will take as a total. On average, this ranges from 0.25% to 5.00%.
• Processing or origination fees - This is a one-off charge at the start of your borrowing period, structured as a percentage of the total value of the pertinent invoices. This usually ranges from 1.00% to 3.00%.
• ACH and bank wire fees - As funds will be moving between several different banks ( yours, your customers, and the factoring company’s accounts), you might be charged additional fees.
• Monthly minimum fees - If your client still hasn’t paid up by the invoice deadline, you may be charged additional monthly fees, until you can pay off the full balance. However, this won’t always be the case, because, when it bought your accounts receivable, the factoring company assumed the risk of non-payment.

Which Businesses Can Benefit from Invoice Factoring?

• Manufacturing - Manufacturing companies often need to buy supplies well in advance of being paid the final invoice for a finished product.
• Companies with large amounts of inventory - Stocking up for seasonal demands, buying up new products, and having inventory on hand for emergencies requires cash. Lots of e-commerce and retail businesses use invoice factoring to get their hands on cash.
• Transportation and logistics - Invoice factoring covers daily expenses like fuel and salaries, while you wait for your clients to pay you.
• Staffing agencies - It can take several months for staffing agencies to get paid for placing new hires. Here, invoice factoring becomes an invaluable tool.

How to Choose the Best Invoice Factoring Company

• Research all fees and charges - Costs vary significantly across lending platforms. So, it’s wise to thoroughly research your options, before making a final choice.
• How quickly can funding be approved? - For companies looking for invoice factoring, time is often of the essence. Many lenders can provide funding within 24 hours, but you should shop around to make sure there will be no delays.
• Lender reputation - A quick search on aggregate review sites or online reviews can give you an idea of the reliability of your preferred platform.
• Ask questions - Many lenders encourage you to reach out with questions before you apply. This is a great way to gauge customer service.

Invoice Factoring Loans Pros and Cons

Invoice Factoring Pros

• High rate of approvals - Credit scores and time in business aren’t so important here and invoice factoring has high approval rates
• Fast access to cash - Approvals are fast and you can usually get funding the very same day or within 24 hours in most cases
• Acceptance might not affect your credit score - Since the value of the invoices are the most important factor here, some agencies may not even need to perform a credit check
• All financing is unsecured - The factoring company has shouldered the risk of any non-payment when it agreed to buy your receivables. This means all lending is unsecured and your assets aren’t at risk
• Open to most small businesses - You usually don’t need to be making significant amounts of cash each month to be eligible and many small businesses find they can qualify

Invoice Factoring Cons

• Loss of invoicing control - In most cases the factoring company will take control of your invoicing. This leads to a small reputational risk and can make it harder to keep track of clients
• 1% - 5% of all invoices will go to the factoring company - Like any other form of lending, invoice factoring comes with a cost. Make sure you can afford the hit in order to manage your cash flow

Final Thoughts

Invoice factoring is a fast, safe, and simple way to secure funding for businesses that struggle with cash flow. If you’re still wrestling with a funding dilemma, why not head over to one of the platforms on our list? You’ll find some impressively low factor charges, lenient eligibility requirements, and a variety of flexible lending options to consider.

Remember to strive to ascertain the total amount of fees charged by different lenders. Also, take care to identify the proportion of your invoices you can borrow against each lender. Doing so will help you to optimize your invoice factoring experience.