Got unpaid invoices you want to turn into cash to fund your business? If you run a business and got hit badly by the COVID-19 recession, you might need to consider invoice factoring. Invoice factoring occurs when a business sells its unpaid invoice at a discount for upfront cash to a third-party factoring company. It is a smart funding solution for business owners who need cash immediately for inventory and operations. Invoice factoring treats qualified unpaid invoices as collateral and the cash you will receive in advance from a factoring company is not considered a debt. Factoring transactions are simple as your invoices are purchased in two installments: first, the factoring company gives 70-90% of the invoice amount and the second installment will be deposited to your bank minus the financing fee. The factoring rates vary depending on the accounts receivable. Yet in general, factoring companies could charge daily, weekly, or monthly.
Invoice factoring is one of the most sustainable alternative ways to grow your business. Easy and fast access to cash flow will not only help a business settle its bills for utilities and rent. But it will also help small business owners to focus on growing their business by concentrating on gaining new clients and consumers. Also, invoice factoring help business owners pay suppliers and avoid inventory constraints. Especially now with the Coronavirus pandemic impacting the revenues of small to medium-enterprises, considering factoring from a transparent and reliable factor could be life-saving for a business. So for a business owner, accounts receivable factoring is a great funding solution to grow their business without having to deal with creditors. To give you an idea, factoring can be used in any industry where goods or services are sold and paid for in 30 to 60 days. Some of these industries are trucking, freight brokers, hospitals, oilfield services, construction, and logistics.
In 2019, the factoring industry was valued at $3,114.42 billion with a projected compound annual growth rate (CAGR) of 7.5% from 2020 to 2027. The global factoring market is expected to reach $9,275.15 billion by 2025. According to the Commercial Finance Association, there was a 10.4% or $87.3 billion increase in domestic factoring volume in 2018. Regardless of the size of the business, one factor that led to the recent growth in the factoring service industry is the tightening of credit with banks. Large-sized companies tend to seek help from a factor despite it being more expensive than a bank loan because factoring companies are more attracted to the strength of the account receivables rather than a healthy financial history. Although Europe conquered the global factoring market by obtaining 65.5% in 2017, the Asia Pacific region is catching up at a steady phase with the accelerating business development mainly led by China. Moreover, small and medium enterprises need alternative financing that won’t break the bank. Nonetheless, the factoring market is a highly competitive industry with a large number of global and local players such as Triumph Business (NASDAQ: TBK), HSBC Holdings plc (NYSE: HSBA), Eurobank (OTCMKTS: EGFEY), and Mizuho Financial Group (NYSE: MFG). For future reference, read on our topic about the 16 largest financial services companies in the world.
In June 2020, the World of Open Account (WOA) surveyed the impact of COVID-19 on factoring and commercial finance firms. It stated that 2/3 of the businesses have felt either high or greatly impacted by the COVID-19 economic downturn. Moreover, the recession affected the firms’ volume by about 50%. The survey also stated that factoring and financial firms believe that the impact of COVID-19 is significantly bigger than that of the 2008/09 financial crisis. In all, 60% of the WOA respondents felt that they will need a year or two to bounce back.
Searching for the best factoring company to help you with your business can feel a bit overwhelming. So we created a list of the largest factoring companies that offers the lowest minimum rates with the allowed maximum account receivables. Although factors determining the top factoring companies differ from the size of the companies they work with, the industries they specialize in, and how quickly they provide money, we decided to focus on the revenue and number of employees a company has. We collected data from RocketReach and sorted the largest factoring companies here in our list. We also included discount rates and maximum account receivables a factoring company offers which are directly available on the factoring companies’ websites. We did the research so you want have to! Here are the largest factoring companies in the US as of today:
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10. altLINE
Revenue: $5 M
Number of employees: 31
Market Cap: 4.957 M
Minimum Rate Percentage: 0.75% to 3.5%
Maximum Account Receivable: $4 million
altLINE has been in the factoring industry for more than 80 years. It is the alternative loan arm of The Southern Bank Company. altLINE offers competitive rates and can take advantage of not having to pay additional borrowing charges to third-party providers. Common industries for altLINE include distribution, consulting, food and beverage, textile and apparel, wholesale, oil and gas, staffing, and manufacturing. Aside from factoring, altLINE also offers some of the best financial solutions for your business such as accounts receivable financing and asset-based lending. A business owner can easily get a quote from altLINE’s website and can be accomplished in minutes.
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9. Paragon Financial Solutions
Revenue: $27.60 M
Number of employees: 35
Minimum Rate Percentage: 1%
Maximum Account Receivable: $10,000
A great option for startups and businesses with tax issues is Paragon Financial Solutions (PGNN US: OTC). This factoring company founded in 2014 in Memphis, Tennessee is much smaller compared to other factoring companies on our list with only 2,200 businesses previous business clients yet they have funded more than $2 billion in financings. Paragon Financial Solutions is partnered with Paragon Bank where the company provides non-recourse factoring that allows businesses to get advance sales for their invoice between $30,000 up to $10 million. Non-recourse factoring means you don’t need to buy back the invoice even if a customer doesn’t pay Paragon Financial. Their factoring rates vary from 1% to 2% depending on the industry you’re in and are charged every 30 days.
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8. Breakout Capital Finance
Revenue: $39.20 M
Number of employees: 47
Minimum Rate Percentage: 1.25%
Maximum Account Receivable: $500,000
Breakout Capital is one of the factoring companies that offer short-term business financing solutions to small business owners with transparent and flexible factoring options. The company is founded in 2015 and headquartered in McLean, VA is a fintech company serving small businesses. Breakout capital offers FactorAdvantage wherein you can receive a cash advance of up to $500,000 on top of the account receivables. The repayment term is up to 24 months and there’s only a one-time origination fee of 2.5%. They could be offering a higher rate than other factoring companies but they require no business or personal credit score or monthly revenue for you to be eligible for the financial service.
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7. Charter Capital Holdings
Revenue: $45.60 M
Number of employees: 50
Minimum Rate Percentage: 1.20%
Maximum Account Receivable: $10 million
Low-rate and higher account receivable pay? Charter Capital is the factoring company for you. The company offers same-day funding with no-term contracts. There is no limit for the account receivables yet $10 million is a comfortable number for the factoring company. Charter Capital is popular for its 24/7 professional and timely customer assistance. The factoring fee ranges from 1.20% to 5% depending on your business’s industry. They also have a user-friendly online application wherein after you qualify for the pre-screening, a factoring professional will get in touch with you via phone or email within 24 hours. The only disadvantage is Charter Capital is a recourse factoring company. Meaning, if your customer doesn’t pay you back, you have to buy back your invoice which could hurt your income not to mention the factoring fee.
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6. BlueVine
Revenue: $48.60 M
Number of employees: 281
Minimum Rate Percentage: 0.25%
Maximum Account Receivable: $5 million
In need of fast and flexible funding for your business? BlueVine is here to help you. BlueVine was founded in 2013 by CEO Eyal Lifshitz in Silicon Valley and since then, has helped over 155,000 business owners in funding a total amount of $6.5 billion. Aside from invoice factoring, BlueVine offers a variety of financial solutions such as business term loans and credit. During the Coronavirus pandemic alone, BlueVine provided relief loans to small business owners amounting to $4.5 billion through their Paycheck Protection Program. Recently, BlueVine settled a $75 million revolving credit with the help of Atalaya Capital Management, a private credit investment manager in New York. The capital will be used to fund the expansion of BlueVine in their best-in-class Line of Credit funding solution.
BlueVine is the best factoring company as the rates start at only 0.25% per week. So if your business is low on cash, don’t worry. The approval process is pretty fast as you can be approved in 24 hours.
5. Universal Funding Corporation
Revenue: $68.60 M
Number of employees: 88
Minimum Rate Percentage: 0.55%
Maximum Account Receivable: $5 million
Universal Funding Corporation is one of the largest factoring companies that provide business owners with a low-rate, quick, and easy invoice factoring. Universal Funding Corporation is the best option for you especially if you have experienced maxed-out lines of credit, tax problems, and terminated lines of credit. The company was founded in 1998 and since then has supported more than thousands of businesses and more than $2 billion in transactions.
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4. New Century Financial (NYSE: NEW)
Revenue: $78 M
Number of employees: 22
Market cap: 2,245056 M
Asset: 26.15 B
Market Value: 2.18 B
Minimum Rate Percentage: 1.25 %
Maximum Account Receivable: $10 million
New Century Financial is a Houston-based factoring company founded in 1985 and since then has been providing innovative factoring services for small to medium-sized businesses with annual revenues ranging from $250,000 to $50 million. They offer services to manufacturing, oil and gas, distribution, staffing, service, energy, and transportation industries. The good thing about New Century Financial is they don’t offer any start-up fee and there is no lock-in contract. Not to mention that a business can sell maximum account receivables amounting to $10 million!
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3. TCI Business Capital
Revenue: $170.50 M
Number of employees: 40
Minimum Rate Percentage: 1% to 4%
Maximum Account Receivable: $10 million
TCI Business Capital is headquartered in Minnesota and has been working in the factoring industry since 1994. In 2018, TCI Business Capital Fidelity Bank was acquired by a leading commercial bank, Fidelity Bank of Edina. This helped TCI develop low-cost funding solutions for small and midsized businesses. Some of the industries they factor in are trucking and freight, staffing agencies, oilfield services, telecom and wireless, manufacturing, distribution and wholesale, and janitorial and maintenance. One of the recognizable traits TCI Business Capital has is its customized factoring programs for your specific needs. They also rely on your sales volume and not focus on your company’s value.
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2. Riviera Finance
Revenue: $264.80 M
Number of employees: 159
Market cap: 13.84 M
Minimum Rate Percentage: 2%
Maximum Account Receivable: $5 million
Riviera Finance (RVRA US: OTC) was founded in 1969 and is well-known for its 20 business development centers nationwide. The top leading factoring company operates in all 50 states of the US and Canada. One of the best deals the company offers is their FastCredit that provides businesses the cash they need in 24 hours. A lot of businesses take advantage of this quick turnaround time. Riviera Finance handles 20,000 customer accounts every month. The company provides factoring services to a variety of industries that sells products or services on terms not exceeding 60 days such as temporary staffing agencies, printing companies, manufacturers, wholesalers, and trucking.
Riviera Financing does not require any start-up fees and gives preliminary approvals within 24-48 hours. Plus, you don’t need to have an established business to get approved. Small and medium enterprises are encouraged to apply for a factoring service is able to help their business grow. The only downside is Riviera Financing will ask you to sign a contract for six months. Nevertheless, you can adjust this term depending on your needs.
1. Triumph Business Capital (NASDAQ: TBK)
Revenue: $311.9 M
Number of employees: 166
Minimum Rate Percentage: 1% to 4%
Maximum Account Receivable: $5 million
Topping the list of the 5 largest factoring companies in the world is Triumph Business Capital, a member of Bancorp and their rate starts from 1% and could go as high as 4%. Founded in 2004, Triumph Business Capital was formerly known as Advance Business Capital. Triumph Bancorp, on the other hand, is a reliable financial holding company with diversified financing services such as commercial finance and asset management activities. The Dallas-based company is reputable for factoring industries such as trucking, staffing, oil and gas, government contractors, and freight brokers. They are also popular for their invoice management; an easy access web portal and support from the Triumph Business Capital team.
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Note: We have amended the rankings to correctly reflect the revenue of Triumph Business Capital.
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This article is originally published at Insider Monkey.
Note: We have amended the rankings to correctly reflect the revenue of Triumph Business Capital.