Invoice factoring allows businesses to turn their unpaid invoices into cash immediately. We looked at the best factoring companies and narrowed our review to TCI Business Capital, altLINE, and Paragon Financial Group. These invoice factoring companies will be a good fit for most small businesses in terms of advance rates, discount rates, fees, and industries served.
Best Invoice Factoring Companies 2018
| Visit TCI | ||||
| Visit altLINE | ||||
| Visit Paragon |
TCI Business Capital
altLINE
Paragon*Last Updated: August, 2018
Best Factoring Company Overall: TCI Business Capital
TCI Business Capital is the best invoice factoring company overall because their set advance rate of 90% is among the best in the market. Their discount rates of 1% – 4% will be the best for the majority of businesses, and they have no additional or hidden fees. As long as you meet their $50K monthly minimum, TCI allows you to pick and choose which customer invoices you want to factor on a month to month basis.
Best Factoring Companies Comparison Table: TCI Business Capital vs. altLINE vs. Paragon Financial Group
| Monthly Funding Learn More | Min: $50,000 Max: $20,000,000 | Min: $30,000 Max: $5,000,000 | Min: $30,000 Max: $3,000,000 |
| Advance Rate Learn More | 90% | 90% | 90% - 95% |
| Discount Rate Learn More | 1% - 4% per invoice, charged when it’s paid | .5% - 5% per invoice, charged when it’s paid | 1.25% per invoice for every 30 Days it’s outstanding, charged when it’s paid |
| Additional Fees Learn More | $12.99 ACH fee Or $19.99 wire fee on every payment | $0 - $500 Origination fee; $500 fee if you don’t meet the $30,000 monthly standard for a single month; $30 wire fee if you elect that option instead of the free ACH | Yes - they have additional fees that they would not disclose. Will be disclosed when you receive a proposal, before you sign up for their services. |
| Contract or Spot Factoring Learn More | Contract Factoring (With Month-to-Month & Flex Contracts) | Contract Factoring | Contract Factoring & Spot Factoring |
| Top 3 Industry Specializations Learn More | Trucking, Oil, Telecom | Staffing, Manufacturing, & Wholesale / Distribution | Manufacturing, Wholesaling, Distribution |
| Funding Time Learn More | 24 Hours | 24 Hours | Same Day |
Best Invoice Factor Overall: TCI Business Capital
TCI Business Capital wins the overall invoice factor due to their easy to understand rates, no additional fees, and flexibility in allowing you to pick and choose which customer’s invoices you would like to factor. Their advance rate is fixed at 90%, and it’s always the same for every invoice. Their average discount rate of 2% is going to likely be the cheapest option of those reviewed here for the majority of businesses.
TCI Business Capital has no hidden or additional fees, and their discount rate is reevaluated automatically on a monthly basis based the performance of factored invoices for the previous 30 days. If your factoring volume goes up and/or your customers start to pay quicker, then your rate could decrease. This is a great benefit compared to altLINE, who locks in a yearly rate unless something big changes and you request a re-evaluation.
TCI also lets you pick and choose which of your customer invoices you would like to factor every month. Once you choose a customer then you must factor all of their invoices for that month, but you can avoid factoring invoices for specific customers that may not like a 3rd party collecting their payment. altLINE also allows you to pick and choose, but all of your customer invoices must be paid directly to them regardless of whether they are factored or not.
The only downside we found with TCI Business Capital is that they have a higher minimum monthly factor amount that you must hit than other reviewed, putting tham out of reach for those doing less than $50K per month.
Best Invoice Factor for Those With Net Terms Under 30 Days: altLINE
We recommend altLINE for companies with fast paying customers. If you’re processing over $100K of invoices per month and those invoices are paid in less than 30 days (usually 15) you may receive a discount rate of as low as 0.5%. That is the lowest discount rate offered by the factoring companies we reviewed.
Further, as a direct bank lender, altLINE can be more competitive on pricing when companies are looking to factor more than $300,000. With businesses factoring above $300K, altLINE typically moves to a customer pricing structure, which can lead to offering customers more aggressive rates.
When you factor invoices through altLINE you will always be kept in the loop with any communications to your customer. altLINE encourages you to send the first communication to your customer letting them know about altLINE’s involvement. They won’t reach out to your customer unless you want them to, or unless they have to in order to collect payment on the invoice.
Other Top Invoice Factoring Option: Paragon Financial
Paragon Financial has the largest amount of individual invoice flexibility of the three companies reviewed in this article. You can pick and choose which individual invoices you want to invoice without any other obligations as long as you hit the monthly minimum of $30,000. You don’t have to factor all of the invoices from a single customer like you do through TCI Business Capital, and you don’t have to send all of your invoice payments to the same payment account like altLINE requires.
If you have customers that typically take more than 60 days to pay your invoices then Paragon has a cost that is on the higher end of the scale compared to TCI Business Capital, whose customers average 2%. Paragon charges 1.25% for each 30 day period that your customers do not pay off the invoice. Paragon Financial also has additional fees that will be disclosed to you after you pre-qualify. These fees were not disclosed to us, but they may make this an even more expensive option compared to TCI and altLINE, whose fees are minimal.
In-Depth Overview: TCI Business Capital vs altLINE vs Paragon Financial
Funding Amounts
Invoice factoring companies fund different maximum amounts based on their target customer. Most invoice factors also require their clients to have a minimum monthly invoicing volume. All three of these reviewed companies are similar, ranging from $30,000 – $50,000 in monthly minimums. Failing to meet the minimum monthly requirement could result in fees or disqualification. If your business does not want to factor at least $30k per month, read our review of invoice financing companies for funding options of $1K – $500K.
TCI Business Capital: Can fund amounts up to $20,000,000, with a minimum monthly factoring amount of $50,000.
altLine: Can fund amounts up to $5,000,000, with a minimum monthly factoring amount of $30,000.
Paragon Financial Group: Can fund amounts up to $3,000,000, with a minimum monthly factoring amount of $30,000.
Qualification Requirements
The qualification requirements for invoice factoring companies vary, but most will accept new businesses and businesses with poor or limited credit history as long as you meet three universal requirements:
- You must invoice B2B or B2G customers for goods or services.
- Your customers must be creditworthy.
- You must factor $30,000+ per month.
If you don’t meet these requirements then read our guide to invoice financing companies which can work with lower financing amounts and even have options for B2C invoicing.
Most factors will look into the business credit of your customers when deciding whether to accept you as a client. Being creditworthy for your customers means that they have a clean internet profile, a strong payment history, and possibly a good Duns & Bradstreet credit score. For tips on how to get approved, read 7 Ways to Improve Your Invoice Factoring Application.
Advance Rate
The advance rate is the amount the factor will pay you for your invoice up front, before your customer pays off the invoice. This is typically 75 – 95% of the value of the invoice. Once the invoice is paid off then the factor will pay you the remaining balance of the invoice minus a discount rate and any other fees you’ve agreed to.
TCI Business Capital: Advances 90% of the invoice upfront.
altLine: Advances 90% of the invoice upfront.
Paragon Financial Group: Advances 90-95% of the invoice upfront.
Discount Rate
The discount rate, sometimes referred to as the factor rate, is the percent of the value of your factored invoices the factoring company collects as their fee.
Additional Fees
In addition to your discount or factor rate some factors may charge additional fees that could include some of the following:
- Origination fees
- Application fees
- Factoring/processing fees per invoice
- Late fees if your customer is past due on an invoice
- Mailing fees for contacting your clients
- Service fees
- Lockbox fees
- Credit check fees
- Or more
These fees should be identified in your factoring contract before you sign with the factor because they can greatly increase your total factoring cost.
Recourse or Non-Recourse Factoring
Invoice factoring can be recourse or non-recourse. Non-recourse factoring means that your business isn’t on the hook to the invoice factoring company if your customer doesn’t pay for the goods or services received. With recourse factoring, you must settle the debt with the invoice factor in the event your customer defaults. Non-recourse often requires a higher discount rate than recourse, and it isn’t typically common practice with most factoring companies.
A personal guarantee may also be required in order to be approved. We recommend that you hire a lawyer to look through your factoring contract to understand any exemptions.
Assignment of Invoices & Interaction With Your Clients
Invoice factoring is typically structured so that your customer pays the factor directly. The factor is purchasing your actual invoice, and requires you to assign the invoice to them. This typically requires some type of notification to your customer that your factor will be involved and where the customer can send future payments.
One of the biggest concerns for small business owners looking at invoice factoring is how their customers will interact with the factoring company, and what they will be told. Each factor has different rules with how they interact with your customers, but most will take on collection responsibilities and will start communicating with your customers if their payments are past due.
Spot Factoring & Contract Factoring
Spot factoring means you can pick and choose which invoices you want to factor. Contract factoring means that you must factor all of your qualifying invoices with your factoring company. Factoring companies that allow spot factoring still require you to meet all minimum monthly factor amounts.
Industry Specializations
If an invoice factoring company has experience and expertise in your industry, you are likely to have a better factoring experience. It will be more likely that your factor is familiar with which customers are creditworthy and how they prefer to work with factors. They will also be aware of what net terms are common in your industry and other needs a business like yours might have. This industry expertise will make it more likely you’ll get approved and receive favorable terms than with a factor with less experience.
While each of the factoring companies reviewed in this article will work with a number of different industries, below are the top 3 industries that they typically work with the most.
TCI Business Capital: Trucking & freight factoring, Oil, & Telecom
altLine: Staffing factoring, Manufacturing, & Wholesale / Distribution
Paragon Financial Group: Manufacturing, Wholesaling, & Distribution
Approval & Funding Time
Before you can be approved you will generally need to fill out an application with basic business information, provide tax returns, and provide both an AR aging and AP aging report. TCI Business Capital is the quickest approval time, completing the process in 3-4 days, because parts of their approval process are automated and don’t have to go through a manual approval.
Once you’re approved as a client and you factor an invoice all three providers advance your funds within 24 hours. After your initial approval and funding you will be able to factor your invoices within 24 hours without having to go through the longer approval process again.
Customer Service
All three factoring companies have solid customer service teams that will work with you through the application process and after you’ve been fully approved. It’s important to enjoy working with the factor you choose because you will be working with them on a weekly basis to factor new invoices.
More Invoice Factoring Companies
| TCI is best for small businesses looking for a traditional Factor because of their flexibility in allowing you to pick and choose which of your customer’s invoices you would like to factor. They’re process is also streamlined, allowing your discount rate to be reevaluated automatically every 30 days. | |
| altLINE is best for small businesses who get paid immediately on their invoices, or who offer net terms of less than 30 days. This is because they can offer lower rates, as low as 0.5%, depending on how much you factor and how quick your customers pay off the invoice. | |
| If you’re really looking for a traditional factor with a lot of individual invoice flexibility, Paragon Financial Group is likely your best option. Your only obligation on the flexibility is making sure you factor $30K+ per month. | |
| Payability provides daily cash flow to Amazon sellers to help grow their businesses. After a sale is made on Amazon, sellers typically don’t receive that cash for up to 14 days because of 2-week Amazon’s payment terms. With Payability, you can sell on Amazon today, and get cash in your bank account tomorrow. | |
| BlueVine may be your best invoice factoring option if you’re looking for the best of both worlds between invoice factoring and invoice financing. They can fund you between $100K and $2.5 million, and offer the flexibility of invoice financing with a similar cost to invoice factoring. | |
| Fundbox is a fit for you if you’re looking for a streamlined process with only $1,000 - $100,000 of funding at a time. Fundbox doesn’t do a personal credit check, and they can get you funded extremely fast, but their product works more like a line of credit facility. | |
| New Century Financial is a good fit for you if you’re looking to process your application quickly and belong to any of these industries: Energy Operations, Transportation, Manufacturing, Oil and Gas, Distribution, Staffing, Service, or Technology. | |
| Riviera Finance focuses on the full package of invoice factoring services including credit services and full receivables management. They are a good fit for companies in Trucking, Temp Staffing, Oil/Gas, and other Profitable small businesses. | |
| Canadian companies may find Interstate Capital to be their best option for invoice factoring. They just serve businesses in the Trucking, Staffing, Manufacturing/Distribution, and Service Business industries. | |
| If you’re looking for a firm that will handle your entire receivables process, and loan as little as $10K per month, then Charter Capital may be the right partner for you. | |
| If you need non-recourse factoring, CBC could be your best option (they offer both recourse and non-recourse). They can also help international companies better than the competition, having offices in both Hong Kong and Shanghai. This makes them a great fit for importer or exporter manufacturing/distribution companies. | |
| If you're a small business that invoices commercial or government customers on a regular basis and needs to have more control over how and when you get paid. It is designed for businesses that need a longer-term, more comprehensive cash flow solution. |
Payability
BlueVine
Fundbox
New Century Financial
Riviera Finance
Interstate Capital
Charter Capital
Capital Business Credit (CBC)
NowAccountBottom Line
Invoice factoring is a good tool for businesses that need money to fill in cash flow gaps while they wait for their customers to pay. It’s also a great tool to streamline your accounts receivable. Our pick of the best invoice factoring companies is TCI Business Capital. TCI will advance you 90% of the value of your invoices, and their discount rates are the best we’ve seen at 1% – 4% and they have no hidden fees. They can initially approve you for $50,000 – $20,000,000 of factoring in 3-4 days.
Jason Krasick
We’re in the wholesale and distribution business and sometimes face cash flow issues with larger orders. Which company is the better choice for us?
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Brad Gurney
This is very helpful as business owners have so many different options for their funding needs. The traditional factoring company is a better option if the business owners weekly cash flow is not certain.
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Thank you Brad, glad you found the article useful!
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Joe Sillay
Good article, Privanka. You did an excellent job of boiling things down, creating a summary and organized format anyone can wrap their mind around. I do comment that I think the pricing for the Commercial Capital entrant representing the larger end of the market seems quite high for financing in that size range. The pricing has really been driven down in recent years due to aggressive bank lending practices and the tremendous liquidity created by the government’s quantitative easing packages. For line amounts from $100 thousand up to $10 million I see the market dictating pricing in the range of 0.75% to 2% range for 30 days. The pricing offered my the BlueVine and Fund Box options seems low for deals that size.
Eyal makes a very good point about “apples to apples”. The frustrating thing about commercial finance is that it is largely unregulated and every firm does it differently. As Eyal points out, arcane structural details in the mechanics of the funding can serve to deliver far higher cost than nominal rates would suggest. So many times, summarizing makes it easy but may lead to the wrong conclusion. The differences can be startling.
I have a video series on our website on this subject that you can find at http://www.federalnational.com/library/invoicefactoring.aspx
But this is a long slog. The best solution is to shop thoroughly and have a trusted attorney or accountant carefully review the proposals and the factoring agreements before signing. For a large factoring line, this is a very good investment. One good approach, once you and your advisor have narrowed it down to two or three providers, is to share each proposal and factoring agreement with the other contestant(s) and ask them to explain how and why their proposal is best. Make sure they understand others are proposing and that they should submit their “best and final” offers before you share them. Nobody can get Apples-to-Apples better and quicker than another factoring company.
Thanks again.
Joe
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Thanks for your comment Joe. We actually just updated some of the cost numbers after speaking with the companies again. I think the reason that BlueVine and Fundbox are able to offer such good pricing is because they’ve completely automated the application process and approval process. Commercial Capital’s pricing varies a lot based on the industry and size of credit line. I agree that it’s a great idea to have an attorney review your factoring agreement and to shop around with competing proposals. I watched one of your videos, and it was a great way for small businesses to learn more about factoring!
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RIck
Fundbox will only start with an initial credit line of $5000.00, whereas Bluevine gave us $20,000.00. Enough said. Fundbox takes researching to find a customer service number, and Fundbox is 100% automated, and nobody can alter or modify anything over there. Bluevine hands down!!!
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Hi Rick, Thanks for your input. We think Bluevine is a good company and worth consideration, particularly if you need to start off with a high credit limit as you suggest. Best, Marc
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Eyal Lifshitz
Thanks for the post Marc. We always appreciate the coverage.
I have a few comments on the content:
1) It is important to compare “apples to apples”. 3 of the companies above (including us BlueVine) provide real invoice financing, where they purchase the proceeds of the invoice, the other one (your top choice) provides an installment loan based on the value of the invoice. The difference in financing structure has several major implications:
* Effective rate is twice as high than the fee in installment loans. In case of an installment loan, the average principal outstanding during the term of the loan is about half the amount initially borrowed. For example, if you got an advance of $1,000, but are paying it back on weekly installments over 3 months – after 1.5 months you have already paid back half the amount borrowed, after 2 months you’re only left with a third of the amount initially borrowed. Therefore, the rates that you quoted above for the provider with installment loans are effectively twice as high. I recently wrote an article for entrepreneur.com about how small business owners should avoid these errors when calculating financing costs (http://www.entrepreneur.com/article/237716). When you compare “apples to apples” our lowest rate quoted is actually the least expensive.
* Advance rate is meaningless for installment loans. The advance rate only has a meaning when the full amount is paid back only at the end of the term by the account debtor (the client’s customer). For installment loans, you pay back whatever you borrowed over the term of the loan.
* With real invoice financing, the client doesn’t pay anything back, and the provider is paid only when the invoice is paid off and not before. In contrast, in case of an installment loan, the borrower needs to make the installment payments regardless of when the invoice is paid off by their client. For example, let’s say you have an invoice you’d like advanced and it is due within 60 days: in case of a 3 month installment loan, you’d have already paid back 2/3 of the invoice amount in installments before you are paid by your client. This is not the case with real invoice financing – you do not need to pay anything during the term of the invoice; the financing provider is only paid when the debtor (the client’s customer) pays.
2) There are other things to consider when choosing a financing provider beyond the ones mentioned in the article:
* What is the maximum amount of funding/credit line available?
* What kind of service/support is available? Is there a phone number you can call when you have questions?
* How quickly can you get your funds? How fast are funding decisions made?
The providers mentioned in this article differ in their product ,service and approach.
I encourage small business owners to do their homework and really understand their options. At BlueVine, we’re only a phone call away, and will gladly answer any questions. We are eager to help small businesses thrive.
All the best,
Eyal Lifshitz
CEO, BlueVine
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Hi Eyal,
I really appreciate your contribution. As the article says, I think BlueVine is an innovator and has a strong product. We just happen to like Fundbox better. One your main points is that Fundbox is not a “real factor”. In terms of process, you’re right. In terms of solving the problem that traditional factoring addresses, providing short-term financing based on receivables, I think its hard to argue does fall into invoice factoring space.
You argue that Fundbox is not the cheapest and your firm would is the cheapest option, when comparing the lowest possible rates charged. However, you don’t seem to take issue with any of the factual information provided about what the charges would be on a $5,000 invoice being factored for 12 weeks or the interest rates quoted for Fundbox or yourself.
Are you saying that Fundbox does not on average effective interest rate of 2% per month?
Would you mind sharing what the average effective interest rate for the clients of using BlueVine?
I look forward to your response. – Marc
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Eyal Lifshitz
Hi Marc,
Thanks for your response. Here’s my response to your questions:
1) Let’s take your example above for $5,000 invoice for 12 weeks. The lowest fee with us would be $300 and with Fundbox would be $243. HOWEVER, as mentioned in my previous comment, this is not apples to apples and is a flawed comparison. With us, the average amount you’d have outstanding during the 3 months period is $4,500 (90% advance rate as is with our best plan), with Fundbox the average amount would be $2,500 (since you’re paying the invoice back on weekly installments). Therefore, our fees relative to the average principal outstanding for the entire time is 300/4500 = 6.66%, whereas for Fundbox it would be 243/2500 = 9.72% . Note that the example above relates to both of our “best” pricing. This example will probably look different depending on the specific pricing plan of the customer with both providers.
2) While pricing is important, is shouldn’t be the only criterion for assessment, as you’ve clearly pointed out. Alternative financing will always be more expensive than bank financing. However, the benefits of alternative financing are speed, convenience, simplicity, and flexibility. If you are business owner, and you can easily obtain bank financing for the amount you need, you should definitely do so. If not, you should choose the alternative financing provider that provides the best fit for your needs.
Finally, I think Fundbox has a good product. However, despite the cosmetic similarities of our products, our services are quite different. Which is one is better? It all depends on the needs and priorities of the business owner.
All the best,
Eyal Lifshitz,
CEO, BlueVine
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