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Invoice Factoring Reviews

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  • Lendio Review

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    Pros Relaxed credit score requirements 2-7 days time to funding Cons Opaque terms and fees Relatively slower time to funding compare to many alternative lenders Overview Lendio is a business financing platform that matches customers to funders. While Lendio does not originate loans directly, its network of over 75 business funders — including big names […]

  • Fundbox Review

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    Pros Relaxed borrower qualifications Short application process No credit score requirements Good customer support Cons Potentially high terms and fees Unsuited for large businesses Overview Fundbox is a business lender that specializes in offering financial products to small businesses. Founded in 2013, the company originally offered an invoice financing product for small businesses called Fundbox Credit. […]

  • BlueVine Review

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    BlueVine, an online lending service, was founded in 2013 after the founder watched his father, a physical therapist, struggle with inconsistent cash flow due to slow payouts by insurance companies. It shouldn't come as a surprise, then, that the company offers a number of services intended to help merchants overcome cash flow problems.

  • StreetShares Review

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    Pros Relaxed borrower qualifications Competitive terms and fees Easy application process Typical time to funding: 2 – 7 days No prepayment penalties Excellent customer service Cons Unsuited for large businesses Overview StreetShares is an online lender that offers business installment loans, lines of credit and, most recently, contract financing (a service similar to invoice factoring). This loan service was […]

  • American Receivable Review

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    Pros Suited for startups and small businesses Relaxed borrower qualifications No credit score requirements Easy application process No monthly minimums Cons Some additional fees Long-term contract required Overview American Receivable (not to be confused with North American Receivable Management Service, a debt collection service) offers invoice factoring services to B2B businesses. A quick glance at […]

  • Behalf Review

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    Pros Suited for startups & small businesses Relaxed borrower qualifications Competitive terms & fees No additional fees Cons Unsuited for large businesses Overview Behalf (formerly called Zazma) is a business funder that offers financing to small- and medium-sized businesses. Similar to providers of purchase order (PO) financing, Behalf pays the bills for your goods and services; that […]

  • CapitalPlus Equity Review

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    Pros Suited for small business Relaxed borrower qualifications No credit score requirements Competitive terms and fees Cons Unsuited for B2C businesses No non-recourse factoring available Overview CapitalPlus Equity is a business funder that offers invoice factoring to qualified businesses. The company specializes in working with businesses in the construction industry but can work with businesses in […]

  • Dealstruck Review

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    Note: Dealstruck is no longer originating new loans (though they are continuing to service borrowers who already have a loan). For lenders similar to Dealstruck, take a look at StreetShares or Fundation. Highlights Mid-prime business lender Term loans Working capital loans Asset based lines of credit Inventory lines of credit Competitive rates and fees Excellent customer […]

  • Excel Capital Management Review

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    Pros Relaxed loan qualifications Suited for new businesses Suited for small businesses Cons Opaque fees Overview Excel Capital Management in an online lender based in New York City offering unsecured business loans, business lines of credit, and other similar financial products. A prospective borrower will find a huge amount of options with Excel, making it […]

  • Harper Partners Review

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    Pros Suited for small business Relaxed borrower qualifications No credit score requirements Competitive terms and fees Cons Unsuited for B2C businesses Possible additional fees Overview Harper Partners was created out of a desire to help businesses even out their cash flow gaps. After seeing many of their college classmates struggling to get paid on time, […]

What is Invoice Financing?

Invoice financing is a catch-all term to describe a number of business financing products that are backed, in some way, by unpaid invoices. These products can be useful for B2B businesses with slow-paying customers.

There are three types of invoice financing products: invoice factoring, a/r backed lines of credit, and non-traditional invoice financing.

What is Invoice Factoring?

In the past, the invoice factoring industry has had a reputation for being non-transparent and restrictive. However, in general, the practice of factoring invoices is useful for B2B businesses that are strapped for cash. Furthermore, while there are certainly a few bad eggs that contribute to the industry’s poor reputation, many factoring companies do not engage in dubious practices.

Invoice factoring is a relatively simple concept: you sell your unpaid invoices to a factoring company in exchange for money up-front. In most cases, the factoring company will give you 70% – 95% of the invoice value (the “advance rate”) up-front, and give you the remaining 5% – 30% (the “reserve”), minus a fee for their services, after your customer has paid the invoice.

Because the company is purchasing your invoices outright, invoice factoring is not technically a loan product. 

Invoice factoring can get complicated in the details, however. Although the general concept is the same, factoring companies might differ in regards to fees, contract term lengths, which invoices you’ll be required to factor, whether your customers know about the arrangement, and so on.

Here are common ways invoice factoring arrangements may differ:

Contract Term Lengths and Termination Notice

Some factoring companies require contracts of a certain length and charge fees for early termination; others do not require long-term contracts at all. It’s important to know what a potential factoring company requires in terms of contract length and termination notice.

Factoring All Invoices vs. Invoice-by-Invoice

Some companies require that you sell all your invoices, period. Some require that you sell all invoices from specific customers. Others operate on an invoice-by-invoice basis, which means you have control over which invoices you choose want to sell to the company.

Recourse vs. Non-Recourse

This determines who is responsible for paying if your customer defaults on the invoice. If you are in a recourse agreement, you are held liable for the unpaid invoice. If the agreement is non-recourse, the factoring company absorbs the loss. Because non-recourse arrangements are more risky for a company, they tend to cost a little more.

Notification vs. Non-Notification

Most customers have no problem with their unpaid invoices being sold to a factoring company. However, some businesses may not want their customers to know about the arrangement.

For a more thorough rundown of invoice factoring basics, check out this article.

What is an A/R Backed Line of Credit?

If invoice factoring isn’t flexible enough for your needs, you may be able to get an A/R backed line of credit instead. Unlike invoice factoring, A/R backed lines of credit are loans. The total amount you may be able to borrow is contingent on your invoices, but instead of selling them outright, the invoices are used as collateral.

Lines of credit may be useful for businesses that want a little more flexibility than invoice factoring normally offers. Borrowing is not tied to invoices, so you can choose exactly how much and when you would like to borrow capital. In addition, repayments are made over a set period of time, so you will always know exactly how much you are being charged for the service.

If you need a larger credit line, some A/R backed lines of credit can use other forms of contractual revenue, such as inventory or monthly recurring revenue, as collateral.

Other Types of Invoice Financing

In the past few years, some funding companies have developed variations on traditional invoice factoring or A/R backed lines of credit. Although the products differ in some ways, most are intended to provide flexible financing options, and carry fast, streamlined application processes.