Retail companies sometimes encounter scenarios when orders outpace revenues, and they experience a cash-flow gap. In such cases, retailers need to obtain the right type of financing, and for large orders, there is no better solution than retail invoice factoring. Retail invoice factoring is the process of converting unpaid invoices from customers into cash at a discount to manage cash flow and scale a retail business.
The best retail factoring companies include:
- BlueVine: Best overall
- altLINE: Best for short-term invoices
- TCI Business Capital: Best for large factoring contracts
When Retail Companies Use Factoring
A uniform retailer is slowly scaling its business as it serves more individual customers by leveraging a line of credit and incoming revenue. With time, a customer comes along, and orders more uniforms than the retailer can afford to produce. To avoid losing the customer, the retailer invoices the buyer and sells the invoice to a retail factoring company.
Using the funds the retail factoring company provided, the retailer can then produce the uniforms and retain its customers. When that customer returns for future large orders, the retailer need not apply for additional credit. Instead, it can submit the new invoices to the retail factoring company and receive proceeds from the invoices the same day, so that it can scale quickly.
Pros and Cons of Retail Factoring
For retailers unfamiliar with invoice factoring solutions, there are some advantages and some drawbacks to consider. Factoring is one of the best ways to address a cash-flow gap, and it offers a quick, low-cost funding solution. However, retail factoring companies will contact the retailer’s customers directly to collect on invoices. Some companies require a minimum number of monthly invoices before a factoring facility can be approved, making it less accessible.
How We Evaluated Retail Factoring Companies
We selected retail factoring companies based primarily on their flexibility in providing funding to both small and large retailers. We also considered the maximum amount of funding and overall costs to ensure that retailers could scale with the financing company they select. Finally, we evaluated the application process to select the quickest retail factoring companies for small business owners.
BlueVine: Best Overall
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Maximum Funding | $5 million | Advance Rate | 85% to 90% |
Discount Rate | 0.25% to 1.35% weekly | Minimum Annual Revenue | $100,000 |
Expected Annual Percentage Rate (APR) | 13% to 70% | Funding Speed | 1 day |
BlueVine offers the best mix of funding costs, minimum requirements, and funding speed for retailers that need a factoring solution. One advantage of working with BlueVine is that it also offers lines of credit and short-term loans, which small businesses can use to address other financing concerns like renovations or payroll.
altLINE: Best for Short-term Invoice Factoring
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Maximum Funding | $5 million | Advance Rate | 90% |
Discount Rate | 0.75% to 3.0% per 30 days | Minimum Annual Revenue | $360,000 |
Expected APR | 9% to 55% | Funding Speed | Up to 7 days |
altLINE has a high minimum annual revenue requirement because small business owners must factor at least $30,000 in invoices every month. However, it offers the best pricing to retailers with short-term invoices who will be paid within 30 days. This makes altLINE a great solution for established companies with high-quality debtors.
altLINE Business Capital Review
TCI Business Capital: Best for Large Retail Factoring Contracts
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Maximum Funding | $20 million | Advance Rate | Up to 90% |
Discount Rate | 1% to 4% per month | Minimum Annual Revenue | $600,000 |
Expected APR | 12% to 55% | Funding Speed | Up to 5 days |
TCI Business Capital has a very high annual revenue requirement but also offers up to $20 million in funding. This makes it the best provider for very large retailers that require a professional and experienced factoring solution. While funding can take a few days to approve, TCI Business Capital can fund ongoing invoices within 24 hours.
Bottom Line
Retail factoring companies offer a much-needed cash flow solution to small retailers that are scaling their business. To offset the difference between inventory coming in and purchases being settled by customers, factoring provides an advance against invoices. The best retail factoring companies can serve retailers of any size and provide funding on an ongoing basis as the retailer scales operations and onboards new clients.
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