Factoring companies provide advance funds for your business by purchasing outstanding invoices. Qualifying for invoice factoring is generally easier than traditional business financing.
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Best factoring companies in May 2024
Written byJill A. Chafin| Edited byKurt AdamsandJanet Schaaf| April 28, 2024
How Does LendingTree Get Paid?
LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.
How Does LendingTree Get Paid?
LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.
Learn more about how we chose our picks.
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Factoring companies at a glance
altLINE: Best factoring company for startups
| Funding limits | Up to $5,000,000 |
| Advance rate | Up to 90% |
| Invoice factoring fees | 0.75% to 3.50% |
| Origination fee | Typically $350 to $500 |
| Time to funding | 24 to 48 hours |
Funds established businesses and startups
Supported by an established banking institution
Factor rates start as low as 0.75%
Origination and wire fees
Requires client’s customers to be creditworthy
Slightly longer funding times compared to competitors
altLINE works with all business types, including startups and companies with poor or limited credit. While altLINE runs a background and credit check for all applicants, it doesn’t have a minimum credit score requirement. Instead, altLINE focuses on your invoices and payment due dates as part of the approval process.If you don’t qualify for altLINE’s invoice factoring services, it will help you find a startup factoring company that meets your needs.
See Business Loan Options
FundThrough: Best factoring company for software integration
| Funding limits | Unlimited |
| Advance rate | 100% |
| Invoice factoring fees | 2.75% to 8.25% |
| Origination fee | None |
| Time to funding | Next business day |
Automatically syncs with QuickBooks or OpenInvoice
Offers next-day funding
Covers 100% of invoice value
Factoring fees go up to 8.25%
No construction or real estate invoices
Minimum of $100,000 in outstanding invoice(s) to qualify
FundThrough utilizes an advanced AI-powered platform to integrate with accounting software like QuickBooks and OpenInvoice. While the factoring fee is fairly high, you can get up to 100% advance rates on unpaid invoices with FundThrough. There are no long-term contracts or minimum requirements to use FundThrough’s invoice factoring services.
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Riviera Finance: Best factoring company for in-person factoring
| Funding limits | Up to $2,000,000 |
| Advance rate | 95% |
| Invoice factoring fees | 2.00% to 4.00% |
| Origination fee | None |
| Time to funding | 24 hours |
Multiple offices throughout the U.S. and Canada
Non-recourse factoring
Guarantees a 24-hour funding timeline (after approval)
Website lacks details about factor rates
Standard term of six months
Lower funding limits compared to competitors
For business owners who prefer in-person support, Riviera Finance offers more than 25 invoice factoring offices throughout the U.S. and Canada — in addition to online factoring services for all 50 states. With Riviera’s Online Account Management system, you can quickly check the status of your accounts online, day or night. If you need funds fast, Riviera Finance guarantees payment within 24 hours of verifying and approving your unpaid invoices.
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RTS Financial: Best factoring company for trucking businesses
| Funding limits | Up to $3,200 (per truck, per week) |
| Advance rate | 97% |
| Invoice factoring fees | Not disclosed |
| Origination fee | None |
| Time to funding | Within 24 hours |
Loyalty rewards program and perks
No ACH or invoice-uploading fees
Discounts for U.S. veterans
Only serves trucking companies
Must apply via contact form and phone call
Lack of transparency about factor rates
Factoring with RTS Financial can help your trucking business cover expenses like fuel and maintenance when you can’t afford to wait for customer payments. With RTS Financial, you can receive up to 97% of your unpaid invoices with same-day funding and no hidden fees. In addition, RTS Financial offers competitive pricing and fuel savings at over 800 locations throughout the U.S.
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eCapital: Best factoring company for fast funding
| Funding limits | Up to $30,000,000 |
| Advance rate | Up to 90% |
| Invoice factoring fees | 0.90% to 2.50% |
| Origination fee | None |
| Time to funding | Same day |
Offers same-day funding
Non-recourse invoice factoring
High funding limits
Must apply via contact form or phone call
Slightly higher fees with non-recourse factoring
Website doesn’t list criteria needed to qualify
If you need fast funding, eCapital aims to verify and pay your unpaid invoices within the same day, as long as you submit before 10 a.m. eCapital is devoted to helping businesses grow and thrive, providing flexible finance options to suit your needs. Additionally, eCapital offers non-recourse invoice factoring, meaning you can still get paid even if your customer never pays. However, this option comes with slightly higher fees.
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Universal Funding Corporation: Best factoring company for large invoices
| Funding limits | Up to $20,000,000 |
| Advance rate | Up to 95% |
| Invoice factoring fees | 0.55% to 2.00% (first 30 days) |
| Origination fee | None |
| Time to funding | 24 hours |
High invoice credit limits
Apply online in minutes
A+ rating on Better Business Bureau
Doesn’t list specific eligibility criteria
Doesn’t list factor rates beyond 30 days
You have to buy back invoices if the customer fails to repay
Universal Funding provides up to $20,000,000 a month toward your unpaid invoices, allowing you to cover payroll, vendors and other critical expenses. With no hidden fees, fast funding times and positive online reviews, you can rest assured that you’re getting high-quality service with Universal Funding.In addition to invoice factoring, Universal Funding offers accounts receivable financing, payroll funding and tax lien resolution services.
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What is a factoring company?
Invoice factoring helps businesses convert unpaid invoices into cash. You sell outstanding business invoices to a factoring company and get a percentage of the invoice’s value upfront.
The factoring company is responsible for collecting the invoice payment on your behalf, allowing you to focus on your immediate business needs.
You will receive the rest of the money once your client pays their invoice directly to the factoring company, minus the factoring fee (also known as the discount rate).
On this page
- What is a factoring company?
- How invoice factoring works
- How to work with a factoring company
- How to choose a factoring company
- Pros and cons of working with a factoring company
- Alternatives to factoring companies
- How we chose the best factoring companies
- Frequently asked questions
How invoice factoring works
Invoice factoring works by selling your business’s outstanding accounts receivables to a factoring company. You must first find a factoring finance company to work with, meet their eligibility requirements and then submit any unpaid invoices for review.
The factoring company pays you an initial percentage of the invoice’s total value, called an advance rate. It’s typically between 80% to 95% of the invoice’s face value.
The factoring company will then collect payments on your invoices directly from your customers. You’ll receive the remaining balance minus the factoring company’s factor rate, also called a discount rate.
Invoice factoring vs. invoice financing
Invoice factoring and invoice financing sound alike, but they leverage your accounts receivable in different ways.
With invoice factoring, you sell your outstanding invoices to a third-party company for a portion of the face value. The company then handles collecting customer payments on your behalf. Since the factoring company deals directly with your customers, you typically don’t need a good credit score to qualify.
In contrast, invoice financing (also called accounts receivable financing) is when a lender uses your invoices as collateral for a secured business loan. You still need to collect payment for your outstanding invoices, using the funds to repay the business loan. Like other types of small business loans, you must meet the lender’s credit score, time in business and annual revenue requirements.
How to work with a factoring company
1. Evaluate your needs
Determine how much you need to cover your immediate business expenses. Remember, when using an invoice factoring company, you lose a small portion of each invoice.
For example, let’s say you sell $15,000 worth of invoices to a factoring company with a 90% advance rate and a 2% factoring rate. You will receive $13,500 upfront and $1,200 after the invoice is paid, but this service will cost you $300 in total.
Before considering factoring, you might find more affordable financing solutions with a more traditional small business loan or a working capital loan.
2. Review funding qualifications
Qualifying for invoice factoring is typically easier than other types of small business loans. Here are the main factors invoice factoring companies consider when reviewing your application:
- Invoice history: You could be a good candidate for invoice financing if some of your customers consistently pay their invoices on time.
- Credit score: While invoice factoring companies might look at your credit score, they are more interested in your customer’s creditworthiness since that is how they will get paid.
- Monthly revenue: Some factoring companies might require a minimum volume of invoices each month. For example, Elevation Capital requires at least $5,000 in monthly invoices to continue working with them.
- Time in business: Being in business for a more extended period can show factoring companies that you have a sustainable business model, reassuring them that income (and invoices) will continue coming in.
3. Research factoring companies
Read the fine print before signing a contract with an invoice factoring company. Many companies lure you in with the promise of incredibly low rates, only to add extra fees afterward. Understanding the breakdown of advance rates and factors, plus reading business lender reviews can help you find a reputable financing company that fits your needs.
4. Gather documents
Factoring companies will have their own list of business loan requirements, such as personal and business tax returns, bank statements, copies of current invoices, articles of organization/incorporation and payables aging reports. Some factoring companies may require a detailed business plan, although this is more common with regular business loans.
5. Submit and review offers
Factoring companies have their own process for getting a business loan, so contact a representative to inquire about next steps. You can typically receive funds within a day or two after the factoring company verifies and approves your invoices. Overall, this is a quicker process than traditional business financing.
How to choose a factoring company
When selecting the best invoice factoring for your small business, you’ll want to compare the following details.
Funding qualifications: Make sure you meet the company’s basic funding requirements, such as invoice minimums, time in business, credit history and location.
Funding process: Ask the company about their overall process in collecting funds from your customers. You want to ensure they don’t harass clients into paying past debts. Also, what is their process if clients fail to pay their invoices?
Advance rates: A higher advance rate allows you to cover more immediate expenses, helping you get your business back on track. Advance rates range from 80% to 95%, although some companies offer up to 100%.
Factor and other fees: Make sure you understand all associated costs before agreeing to the terms of your financing contract. The lower the factor fee, the more money you will save in the long run.
Time to funding: Ask the company how long it takes from the time you apply to when funds can hit your business bank account so you can plan accordingly.
Industry expertise: Some factoring companies specialize in specific industries. For example, RTS Financial only offers trucking factoring. Make sure that the factoring company is a good fit for your business model.
Recourse vs. non-recourse factoring
Your invoice factoring may be considered recourse or nonrecourse factoring. This determines what happens if your customers don’t pay their invoices.
- Recourse factoring: If an invoice is left unpaid, you will have to swap it for another invoice of equal or more value or buy back the invoice. Recourse factoring is more common since it protects the lenders if they can’t collect money on your behalf. However, repaying your advance could be challenging if your business has limited funds.
- Non-recourse factoring: With this type of factoring, the factoring company assumes full risk of nonpayment. So if your customers fail to pay the invoice, you can still keep the advance you have already received. Because of this, non-recourse factoring tends to have higher fees or be reserved for low-risk industries.
Pros and cons of working with a factoring company
| Pros | Cons |
|---|---|
Access cash for your business within a few days Qualifications are typically less stringent than traditional business loans Guaranteed funds with non-recourse factoring | High factor rates mean lower profit margins Doesn’t help build business credit like traditional financing Lack of stability with recourse factoring |
Alternatives to factoring companies
- Short-term business loan: Term loans provide a lump sum of cash, which you pay off over a few months to several years. You typically need a good credit score, reliable revenue and at least six months to two years in business to qualify.
- Startup business loan: Many lenders offer small business financing for startups or those with a limited credit history. You may need to provide collateral or a down payment to help secure the loan.
- Business line of credit: You can access capital as needed with a revolving line of credit, only paying interest on what you use. Many online lenders and traditional banks provide lines of credit for a range of business types.
- Equipment loan: Banks and online lenders provide equipment financing to help you purchase or upgrade new and used equipment for your company. Since the equipment acts as collateral, startups and low-credit borrowers might have a better chance of approval than traditional financing. You can also consider equipment loans for bad credit.
- Merchant cash advance (MCA): Similar to invoice factoring, an MCA company allows you to borrow funds against future credit and debit card sales. Retail businesses can find relief from seasonal fluctuations with this financing option, although the rates tend to be expensive.
- Microloans: Microloans typically provide up to $50,000 to small business owners who can’t qualify for traditional business financing. However, if you need access to cash fast, note that SBA microloans can take up to three months to fund.
- Business credit cards: You can use business credit cards for everyday business expenses, often earning valuable perks and travel rewards. However, paying off your balance each month is best since credit card interest rates tend to run high.
- Small business grants: Small business grants can come from federal and state government agencies, as well as corporations and foundations. Grants are free money to help startups, women entrepreneurs, minority business owners and other industries grow and expand their companies. While such grants can be competitive, applying for them could help unlock free funds for your business.
How we chose the best factoring companies
We reviewed the leading factoring companies to determine the overall best six factoring companies. To make our list, factoring companies must meet the following criteria:
- Funding limits: Maximum invoice factoring limits from $3,200 to unlimited.
- Flexibility eligibility requirements: Qualifications based on the whole picture, not a minimum credit score or specific time in business.
- Rates and terms: We prioritize factoring companies with advance rates of 90% or higher, competitive factor rates, limited fees and greater options for repayment terms.
- Time to funding: We know businesses often need fast access to capital, so we prioritize factoring companies that can deliver within one to three business days.
- Repayment experience: We consider each lender’s reputation and business practices. We also favor lenders that offer reliable customer service and provide unique perks to customers, like loyalty rewards.
Best factoring companies summary
- altLINE: Best for large invoice factoring
- FundThrough: Best for software integration
- Riviera Finance: Best for in-person factoring
- RTS Financial: Best for trucking businesses
- eCapital: Best for fast funding
- Universal Funding Corporation: Best for large invoices
Frequently asked questions
Invoice factoring services are typically used by business-to-business (B2B) companies with a significant amount of unpaid invoices. Some common industries using invoice factoring include trucking and freight companies, wholesalers, government suppliers, courier and delivery services, commercial food service and more.
Yes, there are factoring companies that specialize in working with startups. For example, altLINE provides factoring funds for startup staffing agencies, offshoot startups, new distributors and wholesalers and nonprofit startups. To qualify for startup factoring, you will likely need to provide a list of your existing and potential customers so the factoring company can review their credit profiles.
Factoring companies usually charge a factor rate, also called the discount rate, which is slightly different from standard business loan interest rates. The factoring company withholds the factoring fee from the invoice total to cover their service. Factor rates can range from 0.75% to 8.25% or higher. In addition, some factoring companies charge an origination fee and other hidden fees on top of the factor rate.
