Best Invoice Factoring
Invoice factoring, otherwise known as Invoice financing, is a process by which as-yet-unfulfilled invoices are bought by third parties in exchange for monetary advances. In practice, a business will sell its outstanding accounts receivable to a factoring company. Once the sale is finalized, the customer is notified, and the business will receive a cash advance.
Depending on the business and its industry, the advance will be worth somewhere between 70% and 90% of the invoice’s total. The advance will need to be repaid within a pre-determined length of time. In some cases, this may be 30 days, while in others, it may be six months. Regardless of the term of the advance, for every month that the advance goes unpaid, a factor fee is incurred upon the total. Usually, this amounts to an additional 3%.
This process is part of what is called Recourse Factoring. In Non-Recourse Factoring, which is practiced outside of the United States, no factor fee may be added. As a result, non-recourse factors will usually provide a smaller advance and charge greater fees.
Top 3 Best Invoice Factoring
FundBox is a company that specializes in invoice factoring. They offer a more flexible approach, with a choice between 12 and 24 week terms. Instead of flat advance maximums and interest fees, each account is customized based on the business’ credit limit and judged sustainability. As time goes on, these factors are periodically reviewed in order to assess policy changes.
FastPay’s FastLane program provides invoice factoring to small business applicants that are not sole proprietorships. FastPay mandates that, for the first transaction, a company’s invoice advance must total between $5,000 and $100,000. For all other exchanges, the minimum is removed, while the maximum may be extended after the first four months. Whatever the amount, a 3% interest fee is attached the total every 30 days. Small businesses may repay the advance within 30 and 120 days.
Fundera offers its invoice financing services to small businesses that have been in operation for more than three months, and generate over $50,000 in revenue. If granted invoice factoring, the maximum advance amount will be between 50 and 90% of the total amount. For every month that the advance goes unpaid, Fundera will add a 3% factor fee. This will continue throughout the term, which is often set for 12 weeks.
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