Best Factoring Companies – Factoring is a financial service that allows businesses to sell their accounts receivable (invoices) to a third party (factor) at a discount, in exchange for immediate cash. Factoring can help businesses improve their cash flow, reduce the risk of bad debts, and focus on their core operations. However, not all factoring companies are the same, and choosing the best one for your business can be challenging.
In this article, we will review some of the best factoring companies in 2023, based on their rates, services, reputation, and customer satisfaction.
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Best Factoring Companies in 2023
AltLINE
AltLINE is a division of The Southern Bank Company, a reputable and established bank that has been providing factoring services since 1936. AltLINE offers low rates, starting from 0.5%, and high advance rates, up to 90% of the invoice value. AltLINE is a direct lender, which means it does not charge any middleman fees or hidden costs. AltLINE works with businesses across various industries, such as manufacturing, transportation, staffing, and healthcare. AltLINE also provides online access to its platform, where clients can manage their accounts, submit invoices, and request funding. AltLINE is our best overall choice for factoring because of its transparency, reliability, and flexibility.
FundThrough
FundThrough is an online factoring platform that integrates with popular accounting and invoicing software, such as QuickBooks, Xero, and FreshBooks. FundThrough allows clients to factor their invoices using its online platform, without any paperwork or contracts. FundThrough offers competitive rates, starting from 0.5% per week, and fast funding, within 24 hours of invoice approval. FundThrough also provides customer support and invoice management services, such as collecting payments and sending reminders. FundThrough is our best choice for factoring invoices using accounting/invoicing software because of its convenience, speed, and simplicity.
RTS Financial
RTS Financial is a leading factoring company that specializes in the trucking industry. RTS Financial offers high advance rates, up to 97% of the invoice value, and low rates, starting from 1.5% per month. RTS Financial also provides fuel cards, equipment financing, insurance services, and compliance solutions for trucking businesses. RTS Financial has a network of over 50,000 carriers and brokers and a dedicated team of account managers and customer service representatives. RTS Financial is our best choice for trucking businesses because of its industry expertise, comprehensive services, and customer satisfaction.
eCapital
eCapital is a factoring company that focuses on small businesses and startups. eCapital offers flexible terms, such as no minimum volume requirements, no long-term contracts, and no cancellation fees. eCapital also offers low rates, starting from 0.75% per month, and high advance rates, up to 95% of the invoice value. eCapital works with businesses in various industries, such as transportation, construction, manufacturing, and healthcare. eCapital also provides online access to its platform, where clients can monitor their accounts, upload invoices, and request funding. eCapital is our best choice for small businesses because of its affordability, accessibility, and adaptability.
TCI Business Capital
TCI Business Capital is a factoring company that offers flexible contracts and customized solutions for businesses of different sizes and industries. TCI Business Capital offers competitive rates, starting from 1% per month, and high advance rates, up to 90% of the invoice value. TCI Business Capital also provides online access to its platform, where clients can view their accounts, submit invoices, and request funding. TCI Business Capital also provides additional services, such as credit analysis, invoice processing, collections, and treasury management. TCI Business Capital is our best choice for flexible contracts because of its personalized approach, professional service, and customer loyalty. You can contact TCI Business Capital on its website.
Riviera Finance
Riviera Finance is a factoring company that offers non-recourse factoring, which means it assumes the risk of non-payment by the customers. Riviera Finance offers competitive rates, starting from 1% per month, and high advance rates, up to 95% of the invoice value. Riviera Finance works with businesses in various industries, such as transportation, manufacturing, wholesale, and service.
Riviera Finance also provides online access to its platform, where clients can manage their accounts, upload invoices, and request funding. Riviera Finance also provides additional services, such as credit protection, invoice verification, collections, and tax reporting. Riviera Finance is our best choice for non-recourse factoring because of its risk mitigation, security, and experience. You can request a free consultation on Riviera Finance’s website.
How to Choose the Best Factoring Company for Your Business in 2023
Factoring is a financial service that allows businesses to sell their accounts receivable (invoices) to a third party (factor) at a discount, in exchange for immediate cash. Factoring can help businesses improve their cash flow, reduce the risk of bad debts, and focus on their core operations. However, not all factoring companies are the same, and choosing the best one for your business can be challenging. Here are some steps you can follow to choose the best factoring company for your business:
- Interview factoring companies: Once you have a list of potential factoring companies, you should contact them and ask them some questions to evaluate their suitability for your business. Some of the questions you should ask are:
- What are your rates and fees?
- What are your advance rates and funding limits?
- What are your contract terms and conditions?
- How long does it take to set up an account and get funded?
- How do you handle collections and customer service?
- Do you offer recourse or non-recourse factoring?
- Do you have any industry-specific expertise or experience?
- Do you have any customer reviews or testimonials?
- Evaluate proposals: After you have interviewed the factoring companies, you should compare their proposals and see which one offers the best value for your business. You should consider the following factors when evaluating proposals:
- The total cost of factoring, including the factor rate, origination fee, monthly fee, wire fee, etc.
- The advance rate is the percentage of the invoice value that the factor pays you upfront.
- The funding speed is how fast the factor transfers the funds to your bank account after receiving the invoice.
- The contract length is how long you have to commit to working with the factor.
- The flexibility is how easy it is to adjust your factoring volume, terminate the contract, or switch to another factor.
- Make the selection: After you have evaluated the proposals, you should choose the factoring company that meets your needs and expectations. You should also review the contract carefully and make sure you understand all the terms and conditions before signing it. You should also maintain a good relationship with the factor and communicate regularly with them.
Choosing the best factoring company for your business can be a daunting task, but it can also be a rewarding one if you do it right. By following these steps, you can find a reliable and reputable factoring company that can help you grow your business and achieve your goals.
In conclusion, Factoring is a viable option for businesses that need to improve their cash flow, reduce the risk of bad debts, and focus on their core operations. However, choosing the best factoring company for your business can be challenging, as there are many factors to consider, such as rates, services, reputation, and customer satisfaction. In this article, we have reviewed some of the best factoring companies in 2023, based on their rates, services, reputation, and customer satisfaction. We hope this article has helped you find the best factoring company for your business.
Best Factoring Companies: Frequently Asked Questions (F&Qs)
What is AR factoring?
Accounts Receivable (A/R) factoring, often referred to as invoice discounting, is a type of short-term debt financing used by some business borrowers. The transaction takes place between a business (the borrower) and a lender (often a factoring company as opposed to a traditional commercial bank).
Here’s how it works:
- A business sells a good or service, generating an invoice to its buyer for payment at a later date1. This expected future payment sits as an account receivable (a current asset) on the vendor’s balance sheet.
- The management team may choose to sell or assign this account receivable (or a specific invoice) to a factoring company at a discount to its face value in exchange for cash1. This allows the borrower to have cash today instead of waiting for the payment terms to be settled in the future.
- The factoring company pays the business a large percentage of the outstanding invoice amount, follows up with the customer for payment, and then pays the business the remainder of what they’re owed, minus fees.
A/R factoring is more expensive than a traditional bank line of credit but offers higher advance rates and greater flexibility around the uses of the loan proceeds. It’s also commonly employed as a strategy to transfer payment risk to another party (in this case, the factoring company).
How much does AR factoring cost?
Factoring companies usually charge variable rates. The longer your customers take to pay the invoice, the more you’ll owe. For example, say a factoring company charges 2% of the value of an invoice per month. If the invoice is for $50,000 of work and your customer pays within the first month, the factoring company will charge you 2% of the value, or $1,000. If it takes your customer three months to pay, the factoring company will charge 6% of the value, or $3,000. Some factors charge weekly rates instead of monthly ones.
In general, you will pay a factoring fee of between 1% and 5% for accounts receivable financing. But, a number of factors can all affect the actual rate.
What is the difference between AR financing and factoring?
Accounts Receivable (AR) Financing and Factoring are both financial services that companies use to obtain cash from their outstanding invoices, but they operate in slightly different ways.
| AR Financing | Factoring | |
|---|---|---|
| Definition | A type of asset-based loan where a business uses its outstanding invoices as collateral. | A financial service where a business sells its open invoices to a factoring company. |
| Advance Rate | The finance company advances the business up to 100% of an invoice’s value. | The factor advances the business money based on the amount of the outstanding invoices. |
| Fee Structure | Charges a fee based on the invoice’s value each week until the financed invoices are paid in full. | Variable rates. The longer your customers take to pay the invoice, the more you’ll owe. |
| Invoice Ownership | The business maintains ownership and control of its receivables. The business still communicates with its customers and collects payments. | The business sells its receivables to a factoring company, which then collects payments directly from your customers. |
Who is the largest factoring company?
The largest factoring companies in the world include a variety of financial institutions. Some of the top companies operating in the factoring industry are:
- CreditGate24 (Schweiz) AG: A financial services and banking company that provides personal, real estate, and business loans.
- Aldermore Bank PLC (FirstRand Group)
- Bluevine Capital Inc.
- BNP Paribas S.A.
- Deutsche Leasing AG (Deutsche Sparkassen Leasing AG & Co. KG)
- Eurobank Ergasias SA
- HSBC Holdings Plc
- Mizuho Financial Group Inc.
How much does a factoring company cost?
Factoring companies usually charge a fee based on a percentage of the total invoice value. This fee can range from 1% to 5%. However, the actual cost can vary depending on several factors, including:
- The volume of invoices you’re factoring in.
- The creditworthiness of your customers.
- The industry you’re in.
- The terms of your invoices.
In addition to the factoring fee, some factoring companies may also charge additional fees for services such as money transfers, credit checks, and account management. It’s important to carefully review the terms and conditions of any factoring agreement to understand all potential costs.
Do banks use factoring?
Yes, some banks do use factoring. However, more banks don’t factor invoices, often for these reasons:
- Factoring requires specific expertise and talent that can be expensive and difficult to source.
- Factoring requires specific operations that can be time-consuming to set up.
- The banks’ typical customers wouldn’t use factoring.
It’s also worth noting that some banks allow for you, the client, to collect your own invoices, and use their treasury management services as a mailbox for the collection of the invoices. Pricing is typically based on the risk of the deal, the size of the deal, and the volume of invoices sold each month.