Best Invoice Factoring Companies in June 2026
Factoring companies provide advance funds for your business by purchasing outstanding invoices. Qualifying for invoice factoring is generally easier than traditional business financing.
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- Invoice factoring is essentially a cash advance, allowing you to sell your unpaid invoices to a factoring company in exchange for a fee (typically 1% to 5% of the invoice balance).
- Invoice factoring can be a good option if your business has cash tied up in outstanding invoices and you need short-term financing to cover gaps in your budget.
Best invoice factoring companies
| Lender | Best for… | Funding limits | Advance rate | Factor rate (discount rate) | Time to funding | |
|---|---|---|---|---|---|---|
 | Startups | Up to | Up to 90% | Same day | ||
| Software integration | None | 100% | Next business day | |||
| In-person factoring | Up to | 95% | Not specified | 24 hours | ||
| Trucking businesses | None | More than 90% | Not specified | Within 24 hours | ||
| Fast funding | Up to | Up to 90% | Same day | |||
| Large invoices | Up to | Up to 95% | 24 hours | |||
| Month-to-month contracts | Up to | Up to 90% | Not specified | 24 hours |
Factoring companies: Lender overviews
What is invoice factoring?
Invoice factoring, also known as accounts receivable factoring, helps businesses convert unpaid invoices into cash. You sell outstanding business invoices to a factoring company and get a percentage of the invoice’s value upfront.
The factoring company is responsible for collecting the invoice payment on your behalf, allowing you to focus on your immediate business needs.
You will receive the rest of the money once your client pays their invoice directly to the factoring company, minus the factoring fee (also known as the discount rate).
Is working with a factoring company right for my business?
Ultimately, the decision to work with a factoring company is a personal one. Here are some advantages and disadvantages of invoice factoring to consider:
Pros and cons of invoicing factoring
Pros
- Access cash for your business within a few days
- Qualifications are typically less stringent than traditional business loans
- Guaranteed funds with non-recourse factoring
Cons
- High factor rates mean lower profit margins
- Doesn’t help build business credit like traditional financing
- Lack of stability with recourse factoring
Invoice factoring could be a good choice for your business if
- You run a primarily invoice-based business.
- You have customers who pay on time.
- You can afford to pay the factoring fee in exchange for an advance payment.
Invoice factoring might NOT be a good choice for your business if
- You collect other forms of payment, rather than invoicing.
- Your customers often pay late or not at all.
- Having to pay the factoring fee will disrupt your cash flow.
How invoice factoring works
Invoice factoring works by selling your business’s outstanding accounts receivable (typically unpaid invoices) to a factoring company. Here’s an overview of how the process works.
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Find the right company
You must first find a factoring finance company to work with, meet their eligibility requirements and then submit any unpaid invoices for review. -
Receive your advance rate
Once the invoices have been accepted, the factoring company pays you an initial percentage of the invoices’ total value, known as an advance rate. The advance rate typically falls somewhere between 80% to 95% of the invoice’s face value. -
Wait for the factoring company to collect payment
After paying out the advance rate, the factoring company will then send out a notice of assignment to your customers, which is a document that explains that they are managing your invoices and lets your customers know to pay them directly going forward. -
Pay the factoring fee
Once an invoice has been paid, you’ll receive the remaining balance minus the factoring company’s service fee. This fee is commonly called a factor rate, but it can also be called a discount rate. Rates can vary, but this fee typically ranges between 1% to 5% of the invoice’s value.
Invoice factoring example
Finn is a freelancer who has decided to sell $10,000 worth of unpaid invoices to a factoring company. The company pays a 90% advance rate and charges a 3% factoring fee.
Since the company pays a 90% advance rate, Finn receives a $9,000 payment upfront after his invoices have been accepted.
After the 30-day invoice term is up, all his customers have paid the factoring company in full, so Finn receives the remainder of his payment. He receives $700, which is the remaining $1,000 due minus the $300 (3% of $10,000) factoring fee.
Invoice factoring and invoice financing sound alike, but they leverage your accounts receivable in different ways.
With invoice factoring, you sell your outstanding invoices to a third-party company for a portion of the face value. The company then handles collecting customer payments on your behalf. Since the factoring company deals directly with your customers, you typically don’t need a good credit score to qualify.
In contrast, invoice financing (also called accounts receivable financing) is when a lender uses your invoices as collateral for a secured business loan. Payment still needs to be collected for your outstanding invoices, with the funds used to repay the business loan. Like other types of small business loans, you must meet the lender’s credit score, time in business and annual revenue requirements.
Common invoice factoring qualification requirements
Qualifying for invoice factoring is typically easier than other types of small business loans. Here are the main factors invoice factoring companies consider when reviewing your application:
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Invoice history
You could be a good candidate for invoice financing if some of your customers consistently pay their invoices on time. -
Customers’ credit scores
While invoice factoring companies might look at your credit score, they are more interested in your customer’s creditworthiness since that is how they will get paid. -
Monthly revenue
Some factoring companies might require a minimum volume of invoices each month. -
Concentration limits
Some companies limit the amount of factored invoices that can come from one specific customer or receivable. This is known as a concentration limit. -
Accounts receivable (A/R) aging report
This financial statement lists all your unpaid invoices, along with how long they’ve been outstanding. You can typically download this from your accounting software.
How to choose a factoring company
When selecting the best invoice factoring for your small business, you’ll want to compare the following details.
Funding qualifications
Make sure you meet the company’s basic funding requirements, such as invoice minimums, time in business, credit history and location.
Funding process
Ask the company about their overall process in collecting funds from your customers. You want to ensure they don’t harass clients into paying past debts. Also, what is their process if clients fail to pay their invoices?
Advance rates
A higher advance rate allows you to cover more immediate expenses, helping you get your business back on track. Advance rates generally range from 80% to 95%, although some companies offer up to 100%.
Factor and other fees
Make sure you understand all associated costs before agreeing to the terms of your financing contract. The lower the factor fee, the more money you will save in the long run.
Time to funding
Ask the company how long it takes from the time you apply to when funds can hit your business bank account so you can plan accordingly.
Collateral requirements
Some factoring companies require collateral. Most often, this comes in the form of a UCC filing, or blanket lien, which is a first-position lien against all of your business’s assets. Accepting this filing won’t cost anything upfront, but it can make it difficult to qualify for additional financing in the future. Some companies also file a UCC lien against just your accounts receivable, which is less likely to affect future financing.
Industry expertise
Some factoring companies specialize in specific industries. For example, RTS Financial only offers trucking factoring. Make sure that the factoring company is a good fit for your business model.
Your invoice factoring may be considered recourse or nonrecourse factoring. This determines what happens if your customers don’t pay their invoices.
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Recourse factoring
If an invoice is left unpaid, you will have to swap it for another invoice of equal or more value or buy back the invoice. Recourse factoring is more common since it protects the lenders if they can’t collect money on your behalf. However, repaying your advance could be challenging if your business has limited funds. -
Non-recourse factoring
With this type of factoring, the factoring company assumes full risk of nonpayment. So if your customers fail to pay the invoice, you can still keep the advance you have already received. Because of this, non-recourse factoring tends to have higher fees or be reserved for low-risk industries.
Alternatives to factoring companies
While invoice factoring can help you access quick cash for your business, it’s not a perfect solution for all companies. Here are some other business financing options to consider.
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Short-term business loan
Term loans provide a lump sum of cash, which you pay off over a few months to several years. You typically need a good credit score, reliable revenue and at least six months to two years in business to qualify.
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Startup business loan
Many lenders offer small business financing for startups or those with a limited credit history. You may need to provide collateral or a down payment to help secure the loan.
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Business line of credit
You can access capital as needed with a revolving line of credit, only paying interest on what you use. Many online lenders and traditional banks provide lines of credit for a range of business types.
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Equipment loan
Banks and online lenders provide equipment financing to help you purchase or upgrade new and used equipment for your company. Since the equipment acts as collateral, startups and low-credit borrowers might have a better chance of approval than traditional financing. You can also consider equipment loans for bad credit.
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Merchant cash advance (MCA)
Similar to invoice factoring, an MCA company allows you to borrow funds against future credit and debit card sales. Retail businesses can find relief from seasonal fluctuations with this financing option, although the rates tend to be expensive.
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Microloans
Microloans typically provide up to to small business owners who can’t qualify for traditional business financing. However, if you need access to cash fast, note that SBA microloans can take longer to fund.
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Business credit cards
You can use business credit cards for everyday business expenses, often earning valuable perks and travel rewards. However, paying off your balance each month is the best strategy since credit card interest rates tend to run high.
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Small business grants
Small business grants can come from federal and state government agencies, as well as corporations and foundations. Grants are free money to help startups, women entrepreneurs, minority business owners and other industries grow and expand their companies. While such grants can be competitive, applying for them could help unlock free funds for your business.
How we chose the best factoring companies
We reviewed the leading factoring companies to determine the overall best six factoring companies. To make our list, factoring companies must meet the following criteria:
- Flexibility eligibility requirements: Qualifications based on the whole picture, not a minimum credit score or specific time in business.
- Rates and terms: We prioritize factoring companies with advance rates of 90% or higher, competitive factor rates, limited fees and greater options for repayment terms.
- Time to funding: We know businesses often need fast access to capital, so we prioritize factoring companies that can deliver within one to three business days.
- Repayment experience: We consider each lender’s reputation and business practices. We also favor lenders that offer reliable customer service and provide unique perks to customers, like loyalty rewards.