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The Best Accounts Receivable Factoring Companies Reviewed

If you’re a business owner who has a multitude of outstanding invoices that your customers can’t seem to pay promptly, you might feel like your hands are tied while waiting for those funds to arrive. Indeed, it’s tough to maintain — let alone grow — a business when your cash flow is at a standstill. But what if there was a way to instantly transform your outstanding invoices into funds you can use to pay bills, purchase inventory, or otherwise invest in your company? 

Fortunately, there is! Accounts receivable factoring, also known as simply factoring, is a financial process many business owners use to access cash when their customers put off paying their bills. Here’s a closer look at how factoring works along with some factoring receivables companies that can provide you with funds so you’re not stuck waiting around for checks to roll in.  

What Is Accounts Receivable Financing?

Factoring receivables is nothing new. In fact, this form of commercial financing has existed for decades. Essentially, the process involves a company selling its outstanding invoices (receivables) at a reduced rate to a financial institution referred to as a factor. These accounts receivable factoring companies take on the risk of the receivables and provide your business with an instant cash injection. The exact amount of money issued by the factor is based on the due date of the invoices (their age) and the respective quality of your customers.

Although accounts receivable factoring services can be a lifesaver for some business owners, there are some drawbacks as well. With that in mind, here are some of the top pros and cons of this financial arrangement.

Pros

  • Factoring doesn’t require business owners to put up any assets as collateral.
  • Unlike other options, business owners don’t have to relinquish a portion of their company.

Cons

  • Factoring can be more expensive than traditional loans, especially if you miss a payment.
  • In some cases, factoring contracts can last longer than a business owner would like. 

Difference Between Traditional Loans and Factoring Agreements

Business owners who aren’t familiar with the intricacies of financing might not be aware of the distinction between account receivable factoring and traditional loans. In a nutshell, factoring involves the conversion of outstanding invoices into a discounted amount of instant cash, whereas traditional loans involve your business accruing debt. 

Another difference is that traditional loans are based on the business owner’s credit history, whereas factoring depends on the quality of the customers’ credit. Additionally, traditional loans also involve paying interest, while factoring does not. And, finally, lenders might impose restrictions on what a business owner can use a loan for, but factoring includes no such limitations.

Best Options for Accounts Receivable Factoring

Several financial companies offer receivable factoring, but no two institutions are exactly alike. To help you find the best factoring company for your needs, here’s a quick overview of three popular options. 

BlueVine

BlueVine offers receivables factoring of up to $5 million and allows business owners to fund only the invoices they choose without requiring any long-term contracts.

  • Loan Amount ― $5,000-$5 million
  • Advance Rate ― 85-90%
  • Starting Discount Rate ― 0.25% per week

Pros

  • BlueVine offers factoring options for all B2B (business-to-business) enterprises.
  • This factor doesn’t require a minimum bank balance to qualify.
  • BlueVine factoring applications can be funded in as little as 24 hours.

Cons

  • BlueVine doesn’t support B2C (business-to-consumer) business models.
  • BlueVine doesn’t work with medical, gambling, or adult entertainment industries.
Loan Amounts Up to $5 million
Advance Rate 85% to 90%
Rates As low as 0.25% per week
Approval As fast as 24 hours
Click “Check Rates” to apply to Blue Vine

Fundbox

Fundbox uses engineering, predictive modeling, and Big Data analytics to help small businesses and freelancers leverage outstanding invoices to optimize cash flow. 

  • Loan Amount ― $1,000-$100,000
  • Advance Rate ― 100%
  • Starting Discount Rate ― 0.5%-0.7% per week

Pros

  • Fundbox works with all B2B enterprises.
  • Funds for approved applicants can arrive in as little as 24 hours.
  • This factor doesn’t report to personal or business credit bureaus.

Cons

  • Fundbox only works with businesses that invoice their customers.
  • Fundbox doesn’t work with B2C businesses.

Invoice Factoring
Loan Amounts $1,000 to $100,000
Advance Rate 100%
Rates 0.5%-0.7% per week
Approval As fast as 24 hours
Click “Check Rates” to apply to FundBox

Triumph Business Capital

Triumph Business Capital is a financial holding company that currently provides invoice factoring to more than 7,000 small to mid-size businesses.

  • Loan Amount ― $10,000-$5,000,000
  • Advance Rate ― 95%
  • Starting Discount Rate ― 1.5%-5%

Pros

  • Triumph’s website includes a wealth of resources for business owners.
  • The application process is fast and easy.

Cons

  • Triumph’s customer service department has a less-than-favorable reputation. 

Alternative Options to Factoring Receivables

If receivables factoring doesn’t seem like the right fit for your business, there are other ways to go about getting financing for your business. Here are a couple of alternatives along with their advantages and drawbacks. 

Traditional Business Loans

Perhaps the most popular form of commercial financing, traditional business loans come in a variety of sizes and are suitable for nearly any time of enterprise.

Pros

  • Traditional business loans are easy to apply for and funds can be delivered fast.
  • The better your credit history is, the more favorable loan terms you’ll qualify for.
  • Business loans aren’t one-size-fits-all, and they can be tailored to meet your needs.

Cons

  • If your credit history isn’t that great, you might not qualify for favorable loan terms.
  • Business loans are more expensive than several other forms of financing.
  • If you miss a payment on your loan, you could end up paying far more than you actually owe.

Compare Business Loans

Invoice Factoring

Accounts receivable financing is commonly confused with invoice factoring, but the two arrangements are actually quite different. Basically, the distinction boils down to the fact that with invoice factoring, the factoring company assumes the responsibility of collecting unpaid invoices, whereas with receivables factoring the onus remains on you and your business.

Pros

  • Invoice factoring is one of the fastest and easiest forms of small business financing.
  • Business owners can expect payment on up to 85% of their outstanding invoices in 24 hours. 
  • There’s no collateral required, and factoring companies collect payments from your customers.

Cons

  • Invoice factoring can be far more expensive than accounts receivable financing.
  • Invoicing factoring can expose the fact that your business is experiencing cash flow problems.
  • Some invoice factors require their customers to sign long-term contracts.

Learn More About Invoice Factoring

Conclusion

Accounts receivables factoring is a great way for business owners to convert outstanding invoices into instant cash. If you’re curious to learn more about this type of arrangement, visit the above factoring companies to find out what your options are.

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