If you’re a small business owner, you’re probably all too familiar with unpaid invoices. This unfortunate reality is even more frustrating when you factor in operational costs and the salaries of your employees that you can’t afford to delay. Invoice factoring companies offer the perfect solution by enabling you to sell your unpaid invoices for upfront cash. The trick is knowing which factoring company to choose. That’s why we’ve compiled a list of the best names in the business.
1. SMB Compass
SMB Compass is a New York-based invoice financing company that offers financial services to small and medium businesses. The application process is straightforward, and the company has an excellent reputation. SMB Compass also offers other services such as business lines of credit, business term loans, and inventory financing. If you’re looking for invoice financing and don’t wish to wait for a bank loan, SMB Compass is an excellent option to consider.
- ⦿Up to 90% of the loan amount
- ⦿A+ on BBB
- ⦿Factoring rate starts at 1%
Minimum credit score:
Between 80% to 95% of invoice
Minimum time in business:
1% to 3%
Best for Small Businesses with a Low Credit Score
If you’re looking for the best invoice factoring but you aren’t sure which lender offers the best borrowing terms, Lendio is the right place for you. With dozens of online lenders offering factoring finance support, this middleman can help you find the best one. Moreover, the company offers a factor rate as low as 5%. When you fill in the questionnaire on the company’s website, your details will be distributed among dozens of online lenders that will send you their offers. Lendio’s dedicated manager will help guide you through the entire process.
- ⦿Factoring rate can be as low as 5%
- ⦿No collateral
- ⦿Simple to apply
MINIMUM CREDIT SCORE:
FACTORING RATES START AT:
MINIMUM TIME IN BUSINESS:
Up to 80% of invoices
Best for Trucking Industry and Freight Brokers
3. Triumph Business Capital
The next name on our top-rated factoring companies list is Triumph Business Capital. This company tailors its services to specific industries, including trucking, freight brokers, staffing, government contractors, and small businesses. Triumph Business Capital offers non-recourse factoring, meaning you don’t need to worry if your customers don’t pay invoices. But since the company takes all the risk, you can expect higher rates.
- ⦿Fast funding
- ⦿Excellent for freight companies
- ⦿Low borrowing requirements
MINIMUM CREDIT SCORE:
FACTORING RATES START AT:
MINIMUM TIME IN BUSINESS:
Nav is an online marketplace that offers access to numerous factoring firms. It screens your application and matches you with potential lenders for free. With its MatchFactor app, you can easily find the lender that perfectly fits your needs. In addition to different factoring receivables, the company offers a wide range of financial products. Hundreds of clients applaud its financial monitoring tool, which helps improve users’ financial health and gives them access to more affordable financial products.
- ⦿Affordable repayment terms
- ⦿Credit monitoring services
- ⦿Low factoring rates
MINIMUM CREDIT SCORE:
FACTORING RATES START AT:
50% to 80%
Depends on when your customer pays
MINIMUM TIME IN BUSINESS:
Why Choose a Small Business Factoring Service?
Unpaid invoices can create serious cash flow problems and impede your business. That’s why many small business owners turn to invoice factoring, also known as accounts receivable factoring, to avoid difficulties with their own expenses.
– Reduce Turnaround Time
Some clients just don’t pay on time. That can result in unpaid invoices for 90 days or longer. But your utility bills, rent, and the salaries of your employees cannot be delayed. Enter invoice factoring companies. If you choose to sell your outstanding invoices at a discount to a third party or a factor, you’ll get quick access to some badly needed cash.
– Grow Your Business
Instead of wasting your time on pressuring clients to pay up, you need to focus on growing your business. The money you get from invoice factoring enables you to take advantage of all new growth opportunities.
– Flexible Requirements
Unlike traditional banks, online lenders don’t reject your application for invoice factoring because you have a poor credit score. A good credit score, however, means you can get better repayment terms. If you need quick access to funds for your small business, factoring companies are your best bet.
– More Control Over Your Finances
With small business loans or revolving lines of credit, you get a lump sum. You might not need all of the money, but you have to pay back the loan in its entirety. Invoice factoring gives you more control over your finances. Most companies allow you to choose which invoices you want to factor.
The best invoice factoring companies for small businesses will keep your invoice agreement private. Although invoice factoring is perfectly legitimate, many businesses prefer that customers never find out about it. If you aren’t sure that your customers will pay on time, you don’t need to inform them that you’ve sold their invoices to a third party.
– No Collateral
Another great thing about invoice factoring is that you don’t need to use your valuable assets as collateral. All you’re doing is selling your invoices to a factor per a factoring agreement.
Our Methodology for Evaluating the Best Factoring Companies
Invoice factoring is a wise move if you want to avoid financial difficulties or accelerate your business growth. Whether you need to pay salaries or rent a new place for your business, having access to cash is crucial. Numerous online lenders buy unpaid invoices and make payments within 24 hours.
Factoring services are available online, which simplifies the whole process. In addition, there are websites that function like middlemen. Based on your credit score and other business details, the sites recommend lenders that suit your needs.
We’ve reviewed numerous commercial factoring companies and compiled a list of the top names in the business. Here are our criteria for finding the best companies.
Factoring online is designed to make it easier and faster for you to get your money. That’s why you need to choose a company with an easily accessible online dashboard where you can submit all your details. This way you don’t need to waste time by going to lenders with copies of your documents.
You begin the application process by providing basic information about yourself and your business. There are questions related to your credit score, monthly revenue, and how long you’ve been in business. Some public factoring companies may ask for additional details like your Social Security number and driver’s license. It shouldn’t take longer than one business day for your application to be reviewed.
It’s entirely up to you whether you accept any of the offers. If you’re satisfied with the terms and conditions, you can start creating an account to receive the funds. You can also use your existing bank account.
The companies we’ve evaluated make quick payments. Although it depends on how long it takes your bank to complete the transaction, in most cases you’ll get the money between 24 and 48 hours.
The best invoice factoring companies of 2022 allow clients to choose which invoices they want to factor. Clients appreciate this service because they can control which accounts and invoices they want to sell. Some companies aren’t as accommodating and require all invoices from a particular client or a certain period of time.
Recourse and Non-Recourse Invoice Factoring
You have two options if your customer doesn’t pay. The first is non-recourse invoice factoring. That means the factor takes full responsibility if your client doesn’t pay the invoices. Due to the considerable amount of risk involved, even the best non-recourse factoring companies charge higher rates. The second option is recourse factoring, which is more common. In this case, you’ll be responsible for your customer’s debts, but you’ll pay a lower rate.
Payment and Discount Rate
When it comes to invoice factoring, you should know that you’ll never get the full invoice amount. Most companies offer between 75% and 90% of the total amount on the invoice. The rest is used by the company to protect itself from risk. From this amount, the company charges fees for its services, called the discount rate. Cheap factoring companies have a discount rate that ranges between 1% and 6% per month. Each lender calculates the rate based on several factors, including your credit score, the repayment term, and the invoice amount.
Besides invoice factoring, the companies we’ve evaluated facilitate small business loans and offer a variety of other financial services.
THE BEST FACTORING COMPANIES FOR SMALL BUSINESSES
- SMB Compass
- Triumph Business Capital
Invoice Factoring Companies Reviews
- ⦿Fast application process
- ⦿No minimum monthly volume commitments
- ⦿No long-term contracts
SMB Compass is a company that offers invoice financing to small and medium businesses. This service can be helpful for businesses that need quick access to capital to grow their business.
SMB Compass has been in business since 2017 and is headquartered in New York, NY. Since its launch, the company has provided over $250,000,000 to more than 1,250 US businesses, and those numbers keep rising.
SMB Compass has an A+ rating with the BBB, which is the highest rating a company can have, and it shows that the business is trustworthy and has a good track record. It’s one of the best invoice financing companies as it offers fast funding and has an excellent reputation. To qualify for invoice financing, your lender will first check your customers’ credit standing and the invoices’ net terms. They will also check your business’s financial stability and creditworthiness.
After that, you will be offered a loan based on a percentage of the total value of your invoices. Like most invoice financing companies, SMB Compass provides funding in as little as 24 hours, which is much faster than getting a bank loan.
The application process with SMB Compass is straightforward and consists of only a few steps: filling out an online form and providing basic information about your business.
You would need to enter the amount required, provide the name of your business, and confirm how long it’s been operational. Next, you should choose the industry you’re in and give some details about your customers, as well as phone number and zip code.
Lastly, you’ll be asked to provide your email address and full name, after which you can submit your application. After you submit the form, a funding specialist will review your request and reach out to you. The funds will be deposited into your account within 24 hours if everything is approved.
Unlike invoice factoring services, SMB Compass does not buy your invoices outright. Instead, they offer you a loan based on the value of your outstanding invoices, also called invoice financing.
These two terms are similar and often confused. Still, invoice financing would serve you just fine when you’re looking for a solution to your financial situation and decide on invoice factoring. It provides quick access to cash without making you give up control of your receivables.
At SMB Compass, factoring rates start at 1% and go up to 3%. Advance rates range from 80% to 95% of the total value of the invoices you wish to submit for financing.
The payment terms with SMB Compass are flexible, and you can choose to make weekly or monthly payments. The company also offers discounts on your invoices, saving you money.
Unlike some invoice funding companies, SMB Compass does not have hidden fees or charges. You will only be charged for the amount of money you borrow, and there are no origination fees or prepayment penalties.
SMB Compass also offers other services such as business lines of credit, business term loans, and inventory financing. So, if you’re looking for a company that can provide quick access to capital, then SMB Compass is a good option to consider.
- ⦿Dedicated agent to help you choose the right lender
- ⦿Loan calculator
- ⦿Rich FAQ section
Lendio is one of the most popular marketplaces for connecting prospective borrowers with reliable online lenders. The company has been in business for almost 10 years, offering a broad range of financial services, including small business loans. But it also serves as an account receivable factoring company, with up to 75 lenders that offer factoring services. BlueVine, Fundbox, and Reliant Funding are just some of the names on that list.
The application process for invoice factoring couldn’t be simpler. It takes a mere 15 minutes to complete, and you don’t need to install any invoice factoring software on your computer because everything can be completed through Lendio’s site. Simply click on factoring services and start the online application.
There is no minimum credit score requirement, but you still need to provide your current credit score. The company also asks about your revenue, the number of years you’ve been in business, your Social Security number, and a few other details. After submitting the documentation, the company’s system identifies factoring financial services that are suited to your needs. If you’re not sure which lender is the best fit for you, Lendio agents are trained to help you make the right decision.
In addition to the speedy application process, payments are also relatively quick. When you accept an offer from a lender, you’ll need to wait up to 72 hours before you get the money in your account.
Lendio provides 80% of the invoice amount upfront and charges a factor rate as low as 5%. Just like with other top factoring companies on our list, you don’t need to provide any collateral to get the money. Your outstanding invoices act as collateral. Also, when you fill in the questionnaire on the Lendio website, you’ll need to say why you want to factor your invoices. Reasons vary from inventory factoring to opening a new business.
Another great thing about this site is that you don’t need to pay any additional fees. For example, even the largest factoring companies sometimes charge a diligence fee, whereas this factoring company charges only factoring fees.
We applaud Lendio for its level of transparency when it comes to costs and services. Also, the company’s website has a rich and well-organized FAQ section that can be very useful when you’re searching for additional information about factoring services and other financial products.
Triumph Business Capital
- ⦿Invoice factoring calculator
- ⦿Simple online application
- ⦿Non-recourse factoring
The next name on our list of factoring companies is Triumph Business Capital. The Triumph factoring company was founded in 2004 and is an ideal solution for freight brokers, government contractors, and trucking companies. If you work in any of these industries and you’re looking for factoring services for your small business, look no further. Triumph factoring services are already being used by more than 7,000 small and midsize businesses.
According to the BBB, it’s one of the best–rated factoring companies around, having been accredited by the site since 2013.
To apply, simply select the factoring service for your relevant industry. Click on the “Get Started” button and fill in the necessary information. The other option is to click on the Triumph business capital login button, which is in the upper-right corner of the screen. You need to provide basic information, including your full name, address, and company name. You also need to provide information about your monthly sales. The company usually processes your application within 24 hours, then you get the funds in your account.
Factoring or selling receivables to companies might put your own business under the microscope. Triumph doesn’t evaluate your business based on how long it’s been in operation. Instead, the company checks your credit history. This might be the main downside when it comes to the Triumph application process. After you submit the documents, the company makes a hard credit inquiry and charges you $300. Even if your credit score is lower than 500 and you aren’t eligible for the company’s services, you’ll still need to pay this fee.
Another notable downside is the lack of transparency when it comes to rates. The company provides non-recourse factoring, meaning it takes the risk of collecting debts. For any business interested in accounts receivable factoring, this may sound like a good deal. But since the company buying the receivables is taking all the risk, clients have to pay higher rates. There are discounts available, but these depend on many factors, including your credit score and the number of invoices being sold. You can turn to the invoice factoring calculator to calculate the rates.
Triumph Business Capital is not the best option for companies that are looking for flexible invoice factoring. If you factor one invoice, you need to sell all the receivables from that particular client.