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May 29, 2024
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Best Accounts Receivable Factoring Companies For Small Businesses
Don't let unpaid invoices impact your cash flow. Get the funds you're owed quickly with accounts receivable factoring.
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WRITTEN & RESEARCHED BY
Editor & Senior Staff Writer
Last updated onUpdated
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REVIEWED BY
Lead Staff Writer
Advertiser Disclosure: Our unbiased reviews and content are supported in part by affiliate partnerships, and we adhere to strict guidelines to preserve editorial integrity.
As a B2B or B2G business, having unpaid invoices can lead to cash flow issues that can prevent you from growing your business or even covering everyday operational costs.
If you need extra capital for your business as a result of unpaid invoices, there’s a solution: accounts receivable factoring. Also known as invoice factoring, this type of small business financing leverages your outstanding invoices and helps you get the money you need in just days. Best of all, traditional qualifying criteria, such as credit score and annual revenue, may not come into play for approval.
If outstanding invoices are causing cash flow problems with your business, read on to learn more about invoice factoring, whether your business qualifies, and our recommendations to find the best factoring companies for small businesses.
Learn More About Our Top Picks
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Read more below to learn why we chose these options.
Table of Contents [hide][show]
- Best A/R Factoring Companies
- Breakout Finance: Best For Startups Expanding Their Business
- Lendio: Best Marketplace For Comparing Invoice Factoring Options
- P2Binvestor: Best Asset-Backed Lines Of Credit For Large Businesses
- Riviera Finance: Best Non-Recourse Factoring Company
- How Does A/R Factoring Work?
- How To Choose The Right Factoring Company
- The Bottom Line On Choosing A Factoring Company
Table of Contents
- Best A/R Factoring Companies
- The Best Invoice Factoring Companies Compared
- Breakout Finance: Best For Startups Expanding Their Business
- Breakout Finance
- Breakout Finance Services
- Breakout Finance Rates & Fees
- Breakout Finance Eligibility Requirements
- Lendio: Best Marketplace For Comparing Invoice Factoring Options
- Lendio
- Lendio Services
- Lendio Rates & Fees
- Lendio Eligibility Requirements
- P2Binvestor: Best Asset-Backed Lines Of Credit For Large Businesses
- P2Binvestor Services
- P2Binvestor Rates & Fees
- P2Binvestor Eligibility Requirements
- Riviera Finance: Best Non-Recourse Factoring Company
- Riviera Finance Services
- Riviera Finance Rates & Fees
- Riviera Finance Eligibility Requirements
- How Does A/R Factoring Work?
- How To Choose The Right Factoring Company
- The Bottom Line On Choosing A Factoring Company
Best A/R Factoring Companies
Start your search for the best accounts receivables factoring companies with these four options. These options were hand-picked for high advance rates, good customer support, and to provide options for new and established businesses of all sizes.
- Breakout Finance: Best For Startups Expanding Their Business
- Lendio: Best Marketplace For Comparing Invoice Factoring Options
- P2Binvestor: Best Asset-Backed Lines Of Credit For Large Businesses
- Riviera Finance: Best Non-Recourse Factoring Company
The Best Invoice Factoring Companies Compared
| Credit Limit | Advance Rate | Contract | |
|---|---|---|---|
| Breakout Finance | $10 million | 95% | Unknown |
| Lendio | $10 million | 90% | Varies |
| P2Binvestor | $10 million | 70% to 80% | |
| Riviera Finance | $2 million | 95% | Undisclosed |
Breakout Finance: Best For Startups Expanding Their Business
Pros
- Non-recourse invoice factoring
- High credit limits
- Funds in as little as 72 hours
Cons
- Nontransparent fees
- Unknown contract requirements
Why We Chose Breakout Finance For Best A/R Financing For Startups
Breakout Finance offers an invoice factoring program that can help you get up to $10 million for your unpaid invoices. The company's only listed requirement is that you have invoices for delivered work. With no time in business requirements, this is a great choice for new businesses and startups.
Breakout Finance makes it easy to get the funding you need with your unpaid invoices. Simply submit your invoices online, and once they are verified, Breakout sends the agreed upon cash advance. Once Breakout is paid by your customer, the additional funds -- less the advance rate -- is sent to you.
Choose Breakout Finance If...
- You want non-recourse invoice factoring
- You want fast funding in as little as 72 hours
Get Started With Breakout Finance
Lendio: Best Marketplace For Comparing Invoice Factoring Options
Pros
- Fast funding in as little as 24 hours
- A/R factoring & loans available
- High credit limits
Cons
- Unknown contract requirements
- Some lenders only work with businesses in certain industries
Why We Chose Lendio As Best Marketplace For Comparing Factoring Options
If you want to compare your options before choosing a lender, Lendio has you covered. With one application, you can receive multiple options for accounts receivable factoring, accounts receivable loans, and even other funding options like lines of credit and short-term loans.
Through its lending network of 75+ partners, you can receive up to $10 million for your unpaid invoices. Advance rates of up to 90% are available. And if you need funds fast, you may be eligible to receive funding in as little as 24 hours based on the lender you're paired with.
Choose Lendio If...
- You want to easily compare A/R factoring and loan options with a single application
- You need fast funding within 24 hours
P2Binvestor: Best Asset-Backed Lines Of Credit For Large Businesses
P2Binvestor |
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Pros
- High credit limits
- Flexible line of credit
- Excellent customer support
Cons
- Not suitable for small businesses with low revenues
- Not suitable for new businesses
Why We Chose P2Binvestor For Best Asset-Backed LOCs For Large Businesses
P2Binvestor works with larger businesses to provide up to $10 million through an asset-backed line of credit that's secured with A/R and/or inventory. You can draw on up to 70% to 80% of the value of your assets. Daily non-compounding interest is charged only on the funds that are used. Certain customers may also be eligible for a term loan to supplement their line of credit.
P2Binvestor has an easy application process, and you'll work with a dedicated account manager that offers support throughout the process. It's worth noting that the application process can be a bit lengthy, with underwriting taking an average of five to ten days. The company does have stricter eligibility requirements, making this a suitable option for established businesses with high annual revenue.
Choose P2Binvestor If...
- You want a flexible line of credit backed by your accounts receivables
- You operate a large business that generates at least $2M in annual revenue
Riviera Finance: Best Non-Recourse Factoring Company
Riviera Finance |
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Pros
- High maximum advance rates
- Non-recourse factoring
- Relaxed eligibility requirements
Cons
- Long application process
- Some information isn’t clearly disclosed
Why We Chose Riviera Finance For Best Non-Recourse Factoring
Through Riviera Finance, you can receive up to $2 million for your unpaid invoices. The company provides up to 95% of your invoices upfront and has relaxed eligibility requirements, so even new businesses may qualify. Riviera offers non-recourse invoice factoring services, which means that the factoring company -- not you -- is responsible if clients don't pay their invoices.
Riviera promises fast funding within 24 hours of verifying and approving invoices. However, the overall application process can be lengthy (several business days). However, businesses that are willing to wait a few days for funding will like what Riviera has to offer.
Choose Riviera Finance If...
- You want non-recourse invoice factoring
- You’re a new business that has verifiable accounts receivables
Get Started With Riviera Finance
How Does A/R Factoring Work?
Invoice factoring, also called accounts receivable factoring or debt factoring, is a sales agreement where a business sells their qualifying unpaid invoices (accounts receivable) ton invoice a factoring company at a discount for instant cash. Invoice factoring is best for B2B and B2G businesses that want to resolve cash flow issues due to slow-paying customers.
Typically, you’d send out your invoices, wait for the customer to pay, and receive cash only when the customer pays. In this case, you’re responsible for collecting the payment.
With invoice factoring, you sell your unpaid invoices to a factor. You’ll receive an upfront payment of typically 85% to 95% of the invoice total. Then, the factor collects payment from your customers. Once the customers pay, the factor remits the remaining funds to you — minus any fees charged for the service.
The fees you’ll pay will depend on the factor you select. Most factors have a set daily or weekly factoring fee that gets charged until customers pay their invoices. On average, you should expect to pay between 1% and 6% of the invoice value per month.
Let’s look at an example to make invoice factoring easier to understand.
- You sell an invoice worth $20,000 to a factor.
- The factor pays 90% of the invoice value immediately — $18,000 goes directly to you.
- The remaining $2,000 is held in reserve by the factoring company.
- The weekly factoring fee is 0.5% — or $100 per week.
- The customer repays the invoice in three weeks, so the factoring fee adds up to $300.
- This amount is deducted from the cash in reserve — $2,000 — so you receive $1,700.
- In total, you receive $19,700 on the $20,000 invoice.
In this example, $300 was paid for the invoice factoring service. You may have to pay higher or lower fees based on the factoring company you select, which is why it’s essential to shop around. In some cases, you may even find that an alternative financial route makes more sense for your business.
How To Choose The Right Factoring Company
Whether you’re choosing between a few of our recommended lenders or you’re comparing options on your own, it’s important to know what to look for when selecting a factoring company. Before signing your agreements, consider the following:
Factoring Fees
Fast approvals and quick funding can be alluring, but these conveniences may come at a cost. Shop around to ensure you receive the most affordable factoring fees for your situation.
Even if the factoring fees are very low, keep an eye out for additional fees, which can drive up the cost of your financing.
Additional Fees
In addition to factoring fees, some commercial factoring companies charge other fees for their services. These include but are not limited to:
- Origination fees
- Servicing fees
- Monthly minimums
- Renewal fees
- Money transfer fees
- Early termination fees
Over time, these fees can pile up, so it’s essential that you understand all the costs associated with the product before signing a contract or opening an account.
Spot Factoring VS Contract Factoring
If you only need funds to clear a temporary financial hurdle, spot factoring may be the right choice for you. With spot factoring companies, you get to choose the invoices that get factored, and you aren’t locked into a contract. However, this often comes with higher factoring fees.
If you have multiple invoices that you’ll use to secure capital over a more extended period, consider contract factoring. In this case, you’ll sign a long-term contract — typically six months or longer — that will require you to sell all or most of your invoices to the factor. Contract factoring fees are often lower, but you usually must meet specific volume requirements each month. There may be additional fees if you don’t meet this volume or you end your contract early.
Recourse VS Non-Recourse Factoring
From time to time, a customer may not pay their invoice. You may have policies in place for when this happens, but what if you’ve sold the invoice to a factor? The process depends on the arrangement of your agreement.
If you have a recourse agreement, the responsibility falls back on you to purchase the unpaid invoice. If you have a non-recourse agreement, the burden of handling the unpaid invoice falls on the factoring company. However, it is important to note that a disputed invoice may still be your responsibility, even under a non-recourse agreement.
The Bottom Line On Choosing A Factoring Company
If unpaid invoices are throwing a wrench in your incoming cash flows, invoice factoring can certainly help. However, as with any other financial product, it’s important to weigh the benefits and drawbacks, consider short- and long-term costs, and explore other options for getting the capital you need, including business credit cards and unsecured lines of credit.
Consider the long-term effects of financing, then determine if invoice factoring is the right choice for your business.
Erica Seppala
Editor & Senior Staff Writer at Merchant Maverick
Erica began writing on small business topics in 2008. She joined Merchant Maverick in 2018 and focuses on loans, accounting, and POS. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll. She has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a graduate of Limestone University and resides in Greenville, South Carolina.
View Erica Seppala's professional experience on LinkedIn.
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