Factoring Companies in the USA: Everything You Need to Know
Factoring is a type of business financing that can help businesses of all sizes improve their cash flow and grow faster.
It involves selling your accounts receivable (invoices) to a third-party company (the factor) at a discount. The factor then advances you a percentage of the invoice amount, typically 70-90%, and collects the full payment from your customer when it is due.
What is Factoring?
Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable to a third party at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs.
How Does Factoring Work?
Factoring is a relatively simple process. Here is a step-by-step overview:
- You sell your invoices to the factor at a discount.
- The factor advances you a percentage of the invoice amount, typically 70-90%.
- The factor collects the full payment from your customer when it is due.
- The factor pays you the remaining balance of the invoice amount, minus their fees.
What are the Benefits of Factoring?
There are many benefits to factoring, including:
- Improved cash flow: Factoring can help you improve your cash flow by giving you immediate access to cash from your invoices. This can be especially helpful for businesses that have long payment terms or that need to finance growth.
- Reduced credit risk: Factoring can help you reduce your credit risk by transferring the risk of customer non-payment to the factor. This can be especially beneficial for businesses that sell to customers with poor credit.
- Increased sales: Factoring can help you increase sales by allowing you to offer your customers more competitive payment terms.
- Reduced administrative burden: Factoring can help you reduce your administrative burden by taking over the task of collecting invoices from your customers.
What are the Drawbacks of Factoring?
There are also a few drawbacks to factoring, including:
- Cost: Factoring can be expensive, with fees typically ranging from 2-5% of the invoice amount.
- Loss of control: When you factor your invoices, you are essentially giving up control of your accounts receivable. This means that you will no longer have direct contact with your customers about their invoices.
- Potential damage to customer relationships: Some customers may view factoring as a sign that you are struggling financially. This could damage your customer relationships.
Who Should Use Factoring?
Factoring is a good option for businesses of all sizes, but it is especially well-suited for businesses that:
- Have long payment terms
- Sell to customers with poor credit
- Need to finance growth
- Are experiencing cash flow problems
If you are considering using factoring, it is important to weigh the benefits and drawbacks carefully to determine if it is the right fit for your business.
The Best Factoring Companies in the USA
There are many factoring companies in the USA, but not all of them are created equal. It is important to choose a factoring company that has a good reputation and that can meet your specific needs.
FundThrough
FundThrough is a leading factoring company that offers fast and affordable financing to businesses of all sizes. FundThrough is known for its easy online application process and its fast funding times. FundThrough also offers a variety of other services, such as invoice management and credit protection.
Riviera Finance
Riviera Finance is another leading factoring company that offers a variety of factoring services to businesses of all sizes. Riviera Finance is known for its non-recourse factoring options and its competitive rates. Riviera Finance also offers a variety of other services, such as fuel discounts and freight tracking.
RTS Financial
RTS Financial is a factoring company that specializes in serving the trucking industry. RTS Financial offers a variety of factoring services to truckers, including non-recourse factoring, same-day funding, and fuel discounts. RTS Financial is also known for its excellent customer service.
altLINE
altLINE is a factoring company that offers a variety of factoring services to businesses of all sizes. altLINE is known for its easy online application process, its competitive rates, and its wide range of services. altLINE also offers a variety of resources to help businesses grow, such as free credit reports and business planning tools.
Triumph Business Capital
Triumph Business Capital is a factoring company that offers a variety of factoring services to businesses of all sizes. Triumph Business Capital is known for its online invoice management portal, its competitive rates, and its excellent customer service. Triumph Business Capital also offers a variety of other services, such as credit protection and debt collection.
Charter Capital Factoring Company
Charter Capital Factoring Company is a factoring company that specializes in serving small businesses. Charter Capital Factoring Company is known for its easy online application process, its competitive rates, and its excellent customer service. Charter Capital Factoring Company also offers a variety of other services, such as free business consultations and credit protection.
TAFS
TAFS is a factoring company that specializes in serving the transportation industry. TAFS offers a variety of factoring services to transportation companies, including non-recourse factoring, same-day funding, and fuel discounts. TAFS is also known for its excellent customer service.
Prestige Capital
Prestige Capital is a factoring company that offers a variety of factoring services to businesses of all sizes. Prestige Capital is known for its easy online application process, its competitive rates, and its wide range of services. Prestige Capital also offers a variety of resources to help businesses grow, such as free credit reports and business planning tools.
