Best Invoice Factoring Loans for Small Businesses

Unpaid invoices are an unfortunate reality for small businesses across the nation. And as a business owner, there’s nothing more frustrating than not getting paid for your goods or services. These cash flow gaps can make it hard to manage expenses. Fortunately, invoice factoring solutions, commonly referred to as accounts receivable financing, make it easier to pay your bills on time, allowing you to focus on the other tasks you need to get done.

We understand that choosing an invoice factoring company can be a complicated process. To help you cut through the noise, we’re exploring our favorite invoice factoring companies for small businesses.

Lendio is one of the most recognizable small-business loan marketplaces. Rather than originating loans on its own, Lendio acts as a “matchmaker” by connecting borrowers with a network of 75+ lenders—some of which are included on this list. Essentially, they’re the Amazon of small-business loans.

Lendio offers loan amounts of up to 90% of receivables. To improve your chances of receiving financing, Lendio recommends that you meet the following eligibility requirements:

• 6 months of financial history
• $50,000 per month in revenue
• 550 or higher credit score

If your company meets these eligibility requirements, Lendio should be your go-to lending option. Its fast, easy, and comprehensive platform has helped over 33,000 small-business owners secure more than $650 million in loans since 2011.

Determine if Lendio is right for your business by considering the following factors:

Like Lendio, Nav is not a lender. Its lender marketplace helps business owners find the best financing option based on their credit scores and business profiles.

Even better, Nav’s marketplace is lender neutral, meaning that its lender recommendations aren’t swayed by pressure (or payment) from the lenders themselves.

What makes Nav stand out over Lendio, however, is its easy, transparent business credit tools. In addition to personalized financing matches, Nav offers the following benefits for free:

• Credit score and report
• Tools to build credit
• 24/7 monitoring and alerts
• Tips and insights

If you need more in-depth features, opt for Nav's premium plan at $24.99 per month. Enjoy all the benefits of the free plan, plus two personal credit scores, two business credit scores, full credit reports, and $1 personal identity theft insurance protection.

Determine if Nav is right for your business by considering the following factors:

Unlike invoice factoring, the loan must be repaid in 12 or 24 weekly installments. Depending on your repayment schedule and fee amount, your APR can range from 10.1% to 78.6%.

We’re not going to lie to you—Fundbox’s rates are higher than traditional banks and some other online lenders. However, there is a silver lining. It allows you to repay the financing early to save on fees, which significantly lowers your APR. Plus, Fundbox works directly with you rather than with your clients.

Enter some basic information about your business below, and we can refer you to potential lenders that meet your needs. (Please note that only certain lenders allow customers to take out personal loans with the intent to grow a business.)

Bluevine provides up to 90% of the invoice money up front. Once the invoice is paid by your client, you’ll get the rest of the funds, minus the fees.

To qualify for Bluevine’s invoice factoring, you must meet the following eligibility benchmarks:

• 625 or higher credit score
• 6 months in business
• $120,000 in yearly income

While Bluevine’s qualification requirements are quite lenient, keep in mind that it’s not the cheapest invoice factoring available. With annual percentage rates of up to 68%, you should use its invoice factoring as a short-term solution. After you get approved, its system allows you to automatically sync invoices from its accounting software.

Determine if Bluevine is right for your business by considering the following factors:

As a publicly traded bank, Triumph Business Capital offers a variety of products, such as equipment financing, asset-based lending, and traditional term loans. Triumph works with both small businesses and mid-sized businesses.

As for its invoice factoring services, Triumph specializes in helping different industries, including oil and gas, government contractors, trucking, freight brokers, and staffing. In fact, it has dedicated teams for each industry, so rest assured, you won’t be just a number in the system.

Now for the downsides: Triumph Business Capital will make a hard credit pull on your personal credit score when you apply. Not to mention, you’ll be charged a $300 origination fee. If you don’t get approved, all of this will be for nothing. So make sure you meet its eligibility requirements before considering this invoice factoring option.

As for Triumph Business Capital's invoice factoring rates, it’s difficult to give you a precise price due to the lack of information on its website. However, we did find an invoice financing calculator that allows you to determine your rates, fees, and APR.

Before applying, consider speaking with a representative to learn more about Triumph's policies, factoring fees, and rates.

Determine if Triumph Business Capital is right for your business by considering the following factors:

A factoring company is a financial services firm that provides financing to businesses by purchasing their outstanding invoices (i.e., accounts receivable) at a discount. Factoring is a form of financing that allows businesses to get immediate cash for their invoices without having to wait for their customers to pay. 

The factoring company pays a percentage of the invoice value upfront and then collects payment from the customer on behalf of the business. In exchange, the business pays a fee to the factoring company for their services, which typically includes an advance rate (the percentage of the invoice paid upfront) and a factoring fee (a percentage of the invoice value). Factoring is often used by small and growing businesses that need quick access to cash to cover expenses or take advantage of new business opportunities.

Factoring companies work by providing financing to businesses by purchasing their outstanding accounts receivable (invoices). This is how the process works:

1. The business submits its invoices to the factoring company. The business provides the factoring company with copies of its invoices for customers who have yet to pay. The invoices must be for goods or services that have already been delivered or performed.
2. The factoring company advances payment. The factoring company reviews the invoices and advances a percentage of the total invoice value to the business. This advance rate typically ranges from 70% to 90%.
3. The factoring company collects payment from the customer. The factoring company acts as the business' credit and collection department, collecting payment from the customer on behalf of the business.
4. The factoring company remits the balance to the business. After the customer pays the invoice, the factoring company subtracts its factoring fee and any other charges and remits the balance to the business.

Factoring companies charge a fee for their services, which is usually a percentage of the invoice value. The exact fee depends on the factoring company, the type of invoice, the creditworthiness of the customer, and other factors. 

Factoring is a short-term financing solution and is typically used by businesses that need quick access to cash to cover expenses or take advantage of new business opportunities.

When choosing a factoring company, it is important to consider several key factors to ensure you are working with a reputable and reliable provider that meets your business needs. Here are some important things to look for:

• Qualifications: Look for a factoring company that is well-established, has a solid track record, and is regulated by relevant authorities. Check the company's Better Business Bureau rating, customer reviews, and testimonials to get a better understanding of their reputation.
• Rates and fees: Compare the rates and fees of different factoring companies to find the best deal. The factoring fee typically ranges from 1% to 5% of the invoice value, but it can be higher for invoices with longer payment terms or for customers with lower credit scores. Make sure to understand all the fees involved, including any setup fees, monthly minimum fees, or late payment fees.
• Advance rate: The advance rate is the percentage of the invoice value that the factoring company pays upfront. Look for a factoring company that offers a high advance rate, which means you will receive more cash upfront. Keep in mind though that a higher advance rate usually comes with higher fees.
• Customer service: Good customer service is important when working with a factoring company. Look for a company that is responsive, easy to work with, and has a knowledgeable and friendly team.

Taking the time to carefully evaluate these factors can help you choose a factoring company that’s a good fit for your business and provides you with the financing you need to grow and succeed.

Imagine not having to worry about tracking down your customers and asking them to pay up. If it seems like waiting to get paid is what you end up doing most, it may be time to consider invoice factoring services.

Overall, we think Lendio is the best choice for most businesses that require invoice factoring. However, your own unique business needs and preferences as a small-business owner will influence which invoice factoring company will work for you:

• Nav gives you all the benefits of a lending marketplace with extra credit monitoring features
• Fundbox eliminates barriers for businesses with lower credit scores
• Bluevine offers lenient requirements for businesses that haven't been active long
• Triumph offers invoice factoring for businesses in specific industries like oil and trucking

Not sure invoice financing is right for your business? Check out other options for fast and easy business loans.

Just like any other business loan, invoice factoring offers both pros and cons. Pros include immediate and ongoing cash flow, better approval chances, and healthier customer relationships. Cons include high factoring fees, lack of control of invoices, and reliance on customers.

Oh, and perhaps the most beneficial aspect of invoice factoring is the fact that you won’t have to pledge physical collateral to secure payment. So you’ll get to keep your beloved family boat.

If you have non-recourse invoice factoring, you’re in luck. In this scenario, the lender will assume the risk of non-payment. With recourse invoice factoring, by contrast, you (the business owner) agree to absorb most of the risk—which is typically a more affordable option.

We researched more than 50 lenders looking for the best terms for businesses interested in invoice factoring. Our biggest concern in these loans was finding an interest rate that was fair and competitive. 

Disclaimer

At Business.org, our research is meant to offer general product and service recommendations. We don't guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.