Funding can be a major source of worry for a small business. If you run a company and your customers are not paying their invoices, you may end up needing extra funding to see to the day-to-day affairs of the company. In this instance, you can go for invoice factoring to maintain a regular cash flow for your business. Technically, invoice factoring is not a loan. It is a type of funding where the invoice factoring company buys your outstanding invoices at a discount.
The fee for factoring is called factoring fee or discount rate. This usually runs from 1% to 5%. The rate depends on the invoice amount and the creditworthiness of the customer.
There are two types of invoice factoring. There is the recourse factor and the non-recourse factor. With the recourse factoring, you will be responsible for all unpaid invoices. If the customer does not pay the invoice, you will need to take back that invoice and replace it with a new invoice that is equal to the amount of that outstanding invoice or even greater than it. The other type which is the non-recourse factoring means that the factoring company will be responsible for all unpaid invoices. The fee for this option is usually higher because it is riskier.
Invoice factoring has several advantages. One of the biggest advantages is the fact that you will not need to wait for your customers to pay up their invoices before you get money to run your business. There will be no need to pressurize your customers to pay up their invoices as well. The funding process is b also fast and you do not need to provide collateral. The invoices will serve as collateral. Invoice factoring companies do not look at your creditworthiness. This means that even if your bad credit score, you can still apply.
Best Invoice Factoring Companies
- Blue Vine
Blue Vine offers you an amount that ranges from $20,000 to $5 million. The loan term usually ranges from 1 to 13 weeks. Blue Vine can fund your invoice in 1 to 3 days. This financial institution advances from 85% to 95% of the total invoice amount as a lump sum. They will then give you the rest when the customer pays the invoice. Blue Vine charges a fee equivalent to 0.25% of the factored invoices. There is a wire fee when you apply to Blue Vine. However, there is no origination fee, maintenance fee, or termination fees. The discount rate is 0.25% per week. You will need to repay the advances when the customer pays the invoice.
When you want to apply for invoice factoring from Blue Vine, you will be required to complete an application form. The application process takes about 10 minutes. They will inform you about the status of your application within 24 hours. With invoice factoring, Blue Vine requires a minimum credit score of 530, you should also be in business for at least 3 months, and you will need a minimum annual revenue of $100,000. Blue Vine offers recourse invoice factoring.
- Paragon Financial Group
Paragon offers a minimum of $25,0000 and a maximum of $10 million for invoice factoring. The discount rate ranges from 1.25% to 2% every 30 days. There is an origination fee when you apply for invoice factoring at Paragon Financial Group. The financial organization can process invoice factoring in 3 to 10 days. They advance 80% to 90% of the invoices and you will need to repay the advance when your customers pay their invoice. Paragon relies on the creditworthiness of the customer to approve your request for invoice factoring.
Paragon runs credit checks on every customer and they will need to approve each customer before they accept to factor their invoice. The creditworthiness of your company does not matter when you are dealing with Paragon Financial Group. Even if your business has a bad credit score or if you have issues with IRS, the factoring firm will not consider that when approving your application. However, you need an annual revenue of at least $300,000.
One good thing about Paragon Financial Group’s invoice factoring is the spot factoring feature. With spot factoring, you can select the invoices to factor, however, you will need to meet the minimum invoice amount of $250,000.
- TCI Business Capital
With TCI Business Capital, the discount rate ranges from 1% to 4%. When the volume of your invoice increases and your customers pay their invoices earlier, the rate applied to your invoice factoring reduces.
The invoice amounts this company fund ranges from $50,000 to $20 million. They will fund up to 90% of invoices from business-to-business customers and business-to-government customers that are due to make payments in 30 to 90 days. The amount will be automatically repaid when customers pay their invoices. It takes 3 to 4 days for the company to fund your invoice request.
TCI Business Capital does not consider your business credit score or the number of years you have been in business before approving your request. However, you should be ready to process a minimum invoice worth $50,000.
- Harper Partners
Harper Partners offer businesses the flexibility of choosing between recourse and non-recourse factoring. They fund between $25,000 to $5 million invoices per month at a rate that ranges between 1% and 3%. The advanced rate is 90% and the lump sum will be repaid when the customers pay their invoices. The invoice factoring request will be funded in 2 to 5 days.
When you deal with this firm, you do not need to worry about your credit score or the number of years you have been in business. However, you are expected to factor at least $50,000 per month. This also means that you can only qualify for this invoice factoring if you have a minimum annual revenue of $600,000.
Altline’s discount rate differs and it depends on the invoice amount and the time your customers pay their invoices. If the invoice amount is factoring is high and your customers pay early, you can enjoy the discount rate as low as 0.75%. You can apply by phone or online. When you apply, Altline takes 3 to 4 days to fund the initial application. After that, all subsequent invoices can be funded within 24 hours.
The discount rate ranges from 0.75% to 3.5%. They also charge a one-time origination fee of $500. There is also a $30 wire fee. You are expected to factor a minimum invoice of $50,000 per month. If you do not meet this requirement, you will need to pay a fee of $500. They fund invoices between $30,000 to $5 million per month. The advance rate is 90% and the advance will be repaid when customers pay their invoices.
Altline does not request for a minimum credit score. They do not also request that your business should be running for a period before you qualify for invoice factoring.
Ecommerce sites that need funds can check Payability’s invoice factoring terms. This firm offers invoice factoring at a flat rate of 1% to 2%. They factor about 80% of your outstanding invoice. The lender does not look at your credit score. You will need to factor a minimum of $2,000 monthly.
- Blue Vine
Invoice factoring helps you to access funds for your business even if you do not meet the requirements of traditional lenders. It is recommended that you factor invoices of reliable customers.