Since your business relies on a steady cash flow to restock inventory and pay employees, clients taking their time paying invoices could mean the difference between staying in business or having to make capital contributions to keep the lights on. Invoice factoring can help you bridge the gap between unpaid invoices and keeping your business finances in check.
Below are our picks for the best invoice factoring companies in 2021. As businesses continue to adjust to the fallout of the 2020 COVID-19 pandemic, invoice factoring has proven to be an invaluable way to keep cash flowing and business profitable.
9 Best Factoring Companies for 2021
- Triumph Business Capital
- Paragon Financial
- Riviera Finance
- TCI Business Capital
- RTS Financial
- Factor Funding Co.
Triumph Business Capital
Triumph Business Capital specializes in transportation factoring, the industry that most often relies on invoice factoring to keep their vehicles fueled and maintained and their drivers safe and healthy on the road.
Triumph offers extra incentives to its transportation customers, including a fuel card program, insurance programs and equipment financing.
|Advance Rate||Up to 90%|
|Discount Rate||1% to 4% per month|
|Recourse or Non-Recourse||Triumph offers options for both recourse and non-recourse factoring|
|Minimum Credit Score||500|
|Speed of Funding||Same day (perfect for immediate business needs like fuel and insurance premiums)|
|Revenue Requirements||$100,000 a month, and a minimum of 12 months in business|
BlueVine offers flexible factoring terms and transparent fees, as well as a quick and easy application process; they estimate it takes less than ten minutes to apply and you can receive your funds within 24 hours of approval.
BlueVine works exclusively with B2B companies.
|Advance Rate||Between 85% to 90%|
|Recourse or Non-Recourse||BlueVine has both recourse and non-recourse options|
|Minimum Credit Score||530|
|Speed of Funding||Approval and funding in as little as 24 hours|
|Revenue Requirements||A minimum of 3 months in business and $10,000 in monthly revenue|
Paragon Financial offers non-recourse factoring agreements, assuring that if your client does not fulfill their invoice within 90 days, Paragon will assume the loss, with no additional costs to you. Paragon also offers significantly lower fees than other factoring companies. However, unlike many factoring companies, Paragon does not roll their fees into the discount rate.
Additional fees can vary based on your industry, so make sure to go over your agreement carefully.
|Discount Rate||Between 0.9% to 2.5% per month|
|Recourse or Non-Recourse||Paragon offers non-recourse factoring|
|Minimum Credit Score||Paragon has no credit score requirements|
|Speed of Funding||Within 24 hours|
|Revenue Requirements||$30,000 in monthly revenue|
Riviera Finance prides itself on its speed of funding, reliability and flexibility. Riviera services a range of industries, including trucking, wholesalers and service industries, like janitorial services. They emphasize the stability of their own business as a selling point, claiming to have turned a profit every year since 1969 and to still be under their original ownership.
At 92%, Riviera Finance has one of the higher advance rates in the industry.
|Discount Rate||Starts at 2%|
|Recourse or Non-Recourse||Riviera Finance offers both recourse and non-recourse financing|
|Minimum Credit Score||No minimum credit score|
|Speed of Funding||Within 24 hours of invoice submission|
|Revenue Requirements||Up to $2 million in monthly sales, no minimum business age|
altLINE is the invoice factoring side of The Southern Bank Company, a community bank based in Alabama. Since altLINE sources its funds directly from its parent bank, rather than a third party lender or source of funding like many factoring companies, factoring funds are sourced directly from altLINE to you, without third-party involvement. This helps keep costs low, and with FDIC secured funds, gives you an extra level of financial protection.
It’s important to note that altLINE does NOT work with trucking, transportation or freight companies, which is a massive departure from most other factoring companies.
|Discount Rate||Between 0.5% and 3% for the first 30 days. If the invoice is still outstanding after 30 days, the discount rate increases incrementally, capping out at 5%.|
|Recourse or Non-Recourse||altLINE is a recourse factor|
|Minimum Credit Score||500|
|Speed of Funding||Proposal within 24 hours of application approval, and then receive funds within 24 hours of proposal agreement|
|Revenue Requirements||$15,000 to $4 million a month|
TCI Business Capital
Like altLINE, TCI Business Capital is a division of a bank (Fidelity, in this case), making it a more secure and stable source of funds than independent factoring companies.
TCI offers invoice factoring to a wide range of companies, and their website has an invoice factoring calculator, so you can estimate fees in cash rather than with percentages.
|Advance Rate||90% on average; some clients can qualify for up to 95%|
|Discount Rate||Customized for each business, but average of 2%|
|Recourse or Non-Recourse||TCI is a recourse factor|
|Speed of Funding||Same-day funding|
|Revenue Requirements||Minimum requirements are $50,000, with a revenue cap of $10 million|
RTS Financial caters specifically to trucking companies, but what sets them apart from the rest of the pack is their full service approach to trucking business solutions, RTS Pro.
RTS Pro includes powerful trucking software that integrates with your RTS financial account, which makes tracking invoices and handling your fleet’s finances seamless.
|Advance Rate||RTS offers 97% advance rates, giving them one of the highest rates in the industry|
|Discount Rate||RTS does not offer publicly available discount rates|
|Recourse or Non-Recourse||Non-Recourse|
|Speed of Funding||Same day funding|
|Revenue Requirements||No revenue requirements for trucking companies, but non-trucking companies have a minimum of $150,000 a month|
eCapital specializes in freight factoring, and prides themselves on their tech-forward approach to managing the freight industry. They provide powerful tools to manage payments and ensure that your team gets their funding as quickly as possible.
eCapital offers a risk-free 90 day trial, longer than the industry standard, so you can get a real sense of whether the company works for your business before you’re locked in to a long term commitment.
|Advance Rate||Up to 98%, one of the highest industry rates|
|Discount Rate||Between 1% and 5%|
|Recourse or Non-Recourse||Non-recourse factoring is available|
|Speed of Funding||Within 24 hours|
|Revenue Requirements||No set requirements, but rates and fees may be determined based on income|
Factor Funding Co.
Factor Funding Co. specifically caters to small-to-midsize businesses, particularly women- and minority-owned, making it a great resource for companies who may not meet the revenue requirements of other factoring companies.
Factor Funding Co. refers to invoice factoring as “accounts receivable factoring”, but rest assured you’ll still be receiving the same service.
|Advance Rate||Between 70% and 95%|
|Discount Rate||0.5% to 3%|
|Recourse or Non-Recourse||Non-recourse factoring is available|
|Speed of Funding||Initial funding can take up to a week, and once your contract is established 48 hours is usual|
|Revenue Requirements||No minimum requirement|
What to Look For in a Factoring Company
Invoice factoring involves selling your client’s invoice to a factoring customer for an advance rate, or a percentage of the invoice amount upfront (most factoring companies have advance rates between 70% and 95%). Once the client fulfills the invoice, the factoring company then pays the remainder of the invoice to you, minus an agreed-upon finance fee (usually between 1% to 5%).
Rates and Fees
The most important rates to keep in mind while shopping for a factoring company are the advance rate and discount rate. You can use our Dollar Cost Calculator to compare proposals from competing factors.
The advance rate is how much you receive from the sale of the invoice upfront. This rate can vary between industries, with general B2B businesses having advance rates of 70% to 85%, and trucking companies at the higher end with 90% to 97%.
The discount rate is the cut the invoice takes as payment after the invoice has been filled by your client and the remainder of the invoice is paid to you. These rates are generally between 1% to 5%, though some companies like altLINE advertise rates as low as 0.50%.
Most factoring companies use a variable rate structure, with rates raising the longer the invoice is outstanding. It is possible to negotiate a flat rate with your factoring company if your client has a proven track record of on-time payments, but the overall rate can end up being a bit higher.
Some invoice factoring companies roll all fees into their discount rate, but it’s important to double check just what additional fees you may be signing up for. For example, most invoice factoring agreements have some form of early cancellation fee.
Some companies have an initial setup fee, which can be pricey (as much as $2,000), but is a one time charge, while other companies have regular maintenance fees outside of the discount rate. If your business relies on physical documents on wire transfers, there may be additional fees to accommodate any extra steps taken by the factoring company to handle these processes.
Recourse vs Non-Recourse
Invoice factoring works on the assumption that the client will fulfill their invoice within a certain timeframe, generally between 30 and 90 days. However, if your client ends up not paying their invoice, whether that financial responsibility falls on your company or the factoring company depends on whether you have a recourse or non-recourse agreement.
We have a full breakdown on recourse and non-recourse factoring, and the pros and cons of both options, but here is the main difference between the two: recourse factoring agreements mean that if the invoice goes unpaid, your business is responsible for recouping the funds and buying back the invoice; non-recourse agreements means that the factoring company with assume the loss of any revenue, and you won’t be required to buy anything back.
With non-recourse agreements, it’s important to keep in mind that if your client does default on payment, you will not receive the discount rate.
Since non-recourse factoring is far riskier for the factoring company, they come with higher discount rates and more stringent credit checks and requirements. While about 80% of factoring companies offer some form of recourse agreement, companies that offer non-recourse can be few and far between, but are usually more established and have more capital to work with.
One of the advantages of invoice factoring opposed to traditional business loans is that, since the responsibility for payment is not on your business, but on your client, the minimums for approval are not nearly as stringent. Invoice factoring companies generally just want to see that your business is not in dire financial straits and has a little bit of history behind it.
Most invoice factoring companies run credit checks, with minimum scores ranging from 500-600, and require proof that your business has been operational for 3-12 months on average. This usually means sending over your most recent bank statements. These bank statements are also used to determine revenue requirements, which vary based on the industry the factoring company specializes in.
Some invoice factoring companies will run credit checks on your client’s business to determine terms, since ultimately, it is the client that will be responsible for the factoring company being paid.
Since invoice factoring is generally used by businesses that require funds fast, most companies pride themselves on speedy applications and fund deliveries. Most invoice factoring companies have applications that take less than ten minutes, mainly asking about the type of business you run and how much your monthly revenue tends to be.
After approval, most companies advertise being able to get funds to you within 24 hours. Some may require you to approve a proposal before funds are distributed. Some invoice companies may take a few days to set up the first payment, but subsequent payments generally will arrive on time with little hassle.
Choose the Best Factoring Company
Since invoice factoring is in effect selling a debt, (as opposed to taking on a debt with traditional business lending), there is far less impact on your credit, and more relaxed requirements for approval. Invoice factoring is geared towards B2B businesses, and is not generally suited for businesses that rely on consumer sales.
Invoice factoring remains one of the most popular financing options for B2B businesses for a reason. It can be an important resource in keeping your company’s revenue consistent, even if your clients are slow to fulfill invoices or have run into economic issues of their own.
With their lower barrier of entry compared to more traditional business loans, invoice factoring can be a great resource to keep your cash flow steady and your team members paid, but it’s not for every business.
If you’re a more consumer facing business, the terms of invoice factoring most likely won’t work for you. If you have a client that has a habit of leaving invoices unpaid entirely, or is on the edge of bankruptcy, a factoring company may not take the chance on them at all.
If invoice factoring is right for your company, we suggest starting with these companies to find the perfect fit for your business needs.
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Blake Bobit has been an entrepreneur and business owner for over 25 years. He founded Solution Scout to provide the most helpful answers to questions about business solutions. Blake provides strategic advisory services to businesses in many industries nationwide and enjoys the challenge of staying up-to-date on all things HubSpot.