Top 10 Best Invoice Factoring Companies 2020

Invest in your business

Find the invoice factoring solution your business needs from our top picks of business loans offerings.
Last updatedNov 2020

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What is Invoice Factoring?

Invoice factoring lets businesses capitalize on their outstanding invoices by using them as collateral to receive an immediate injection of financing from a short-term loan by one of the best business loan provider. Businesses typically use this strategy in batches each month, so that customers who pay late do not upset the business’s day-to-day operations. In this case, the lender is known as the “factor”, and they purchase a business’ invoices in exchange for capital, which is repaid to the factor once customers pay their outstanding invoices.

In return for providing these services, factors take a fee based on the amount of financing provided and the duration of repayment. The factor relies on the reputation and credit of the company’s customers, the volume of incoming invoices and their amounts, as well as other characteristics including industry and market stability when determining appropriate rates for this service.

Why Do Businesses Need Invoice Factoring?

A lack of working capital can be a tough obstacle to overcome, however, companies with a steady stream of invoices can use them as leverage for accessing the cash they need immediately. Running a growing business costs a significant sum, and in the short-term, overhead costs can significantly outpace revenues in certain cases. A company’s day-to-day operations and liquidity can be seriously hampered by clients who pay on delayed schedules or after work has been completed. Invoice factoring is designed to offset these obstacles, helping businesses manage cash shortfalls by providing immediate funding.

Companies prefer invoice factoring because it offers improved cash flow, scalability with sales, flexible terms and low fees. It is also not considered a loan, and therefore keeps the books much cleaner than alternative options, such as invoice financing. For business owners who need their invoices’ value immediately, invoice factoring can prove to be a solid alternative.

Components of Invoice Factoring

When a factor buys a business’s unpaid invoices, they are taking a risk. While most customer invoices are likely to be paid—especially the high-credit customers that most factors will do business with—they cannot be guaranteed. Accordingly, the factor will release funds in two stages – once when the invoice is received and once more after it is paid by the customer.

The Invoice: Invoices are receipts from a business to customers informing them of the amount owed for the goods or services purchased by the customer. Factors are willing to work on good faith with invoices for customers that have good credit and a strong payment history, giving invoices real monetary value. There are some restrictions, such as factors only allowing invoices that come from high-credit customers, and from those that pay on schedules between 30 and 90 days after invoicing. Many factors also require that a minimum dollar sum of invoices be factored each month.

The Advance Rate: This is the percentage of the invoice total that the business receives up front from the factor. This is usually between 80.0% and 95.0%, but can reach as high as 98.0%. Advance rates can be higher when the invoices are from higher-credit customers, or when volumes are lower. Factors also consider the size of the invoices, the industry the business operates in, and the financial stability of both the business and their customers.

The Discount Rate: After the invoice that the factor bought is paid, the factor releases the rest of the payment that was not included in the advance rate minus a discount rate, which is usually low. This is essentially the small fee that the business is paying for the advancement of their outstanding invoices as cash. How long an invoice goes unpaid also affects its factoring value, as the discount rate can range from 0.5% to 5.0% per week or month, depending on the factor.

Tips on Finding the Best Invoice Factors

  • Best in the Industry: The first step to finding the right invoice factor is to focus on those companies that operate in the business’ industry. Although there are several factors available today, many work with specific sectors such as energy, transportation, manufacturing, or wholesaling. Once companies find a list of the industry’s best available factors, they should move on towards considering their own customers and invoices.
  • Invoice Length With Discount Rate: An important consideration for businesses is how long their customers take to pay outstanding invoices. For those businesses with customers paying invoices on the longer end of the duration spectrum—closer to 90 days—they may be better served finding a factor that only charges a single fee, as opposed to the monthly charges some lenders offer. Businesses should always look for the factors with the lowest fees and highest advance rates to receive the best available financing terms.
  • Get a Big Advance Rate: To make the most out of their invoices, businesses should always seek those factors that offer the highest factor rates. However, companies should beware of high advance rates that are accompanied by heavy discount rates and fees.
  • Additional Fees: For smaller invoices, fees might eat up a significant fraction of the total amount receivable. In some cases, factors charge up to $15 per invoice, while some include other fees such as origination or other hidden transactional fees. If not careful, customers can lose a substantial portion of their invoices to additional charges. Companies should always read the fine print and find transparent factors that are open about their fee structure.
  • Faster is Flexible: While the differences between factors are generally negligible, some may provide funding in as many as 3 business days while others may deliver the business’s advance rate the same day. Depending on how quickly the cash is needed, finding a factor that offers same day disbursement might be an important consideration.
  • Minimum Factor Amount: Can the business fulfill the minimum monthly factor amount required? Some companies require a minimum of $30,000 to $50,000 to offer factoring, so those without consistent billing in this range should steer clear or risk the accumulation of extra fees at the end of the month.

Things to Avoid

Bad Contract Comprehension: Business owners should make sure to read the contract very thoroughly before entering an invoice factoring agreement. Loan agreements are highly specific, including information about fees, procedures, payment schedules, and more. Once agreed upon and signed, these contracts can be difficult to amend. Companies should always guarantee they understand all the terms and conditions before putting a pen to paper.

Slow Customers: In some cases, one should avoid factoring the invoices of their slowest customers, as it may erode the total received after discounting. Some factors include a sizable discount rate for delayed payment, significantly lowering the amount a business receives per invoice.

Getting Denied: As with most forms of financing, applying for invoice factoring can hurt a business-owner’s credit, as they generally require hard credit inquiries. Before getting started, companies should be thorough when making sure they fit the minimum criteria for factoring solutions. Additionally, they should understand the application process to help avoid any complications that could result in a rejection.

The Top 3 Business Invoice Factoring Providers


  • Ideal for - Lendio is ideal for businesses with less than stellar credit who want to fill out one loan application and get offers from multiple lenders on a number of different loan types.
  • Funding Amounts - Lendio is a network for lenders that offer loans from $1,000 to $2 million for a variety of business needs.
  • Minimum Requirements  - To qualify for a loan from Lendio, you must be in business for at least 6 months and have $8,000 in monthly revenues. There is no minimum credit score requirement, although individual lenders may have their own credit requirements.
  • Repayment Terms and Fees - Lendio works with lenders who offer APRs from 0% to 30% with 1 to 5 year loan terms on traditional business loans.
  • Funding Time - Lendio's online application process is quick and easy, particularly because only one application must be filled out for multiple lenders. Once you’ve been approved, funding can be obtained in as little as a few days, depending on the individual lender.
  • Bottom Line  - Lendio is an entire marketplace of lenders competing for your business. By filling out a single application you can see what type of loans you’re eligible for and which lenders are competing for your business. You’ll have a selection to choose from, allowing you to shop around for the best APR and most favorable repayment conditions.

Our full Lendio review provides more details.

  • Ideal for - Kabbage is ideal for small businesses that need immediate access to capital, and borrowers with less than perfect credit that have been in business for at least one year.
  • Funding Amounts - Kabbage offers lines of credit from $2,000-$150,000 for covering any type of expense.
  • Minimum Requirements - To qualify for a Kabbage line of credit you must be in business for at least a year and have $4,200 in monthly revenues. There is no minimum credit score requirement.
  • Repayment Terms and Fees  - Kabbage customers must payback their loans within either 6 or 12 months, depending on their qualifications. Each month they pay back one sixth or one twelfth of the loan plus a monthly fee. Monthly fees range from 1% to 10% for the first 2 months, and settle on 1% for each month thereafter.
  • Funding Time - Filling out a Kabbage application takes minutes and money can be accessed in as little as a few hours. The company's automated system reviews applicant data, calculating the funding and payback term that the potential borrower qualifies for. If approved, funds can be deposited into the account of your choice in a short time. For those who do not initially qualify, Kabbage keeps their information on file and informs them if funding has become available.
  • Bottom Line  - Kabbage is a good option for businesses who need working capital, in the form of a line of credit, to cover certain expenses when cash flow is low. The application process is simple, and funds are delivered quickly. There are no upfront fees and the payment structure is straightforward and transparent.

Read our in-depth Kabbage review to find out more about this lender.


  • Ideal for - Because LendingTree offers loans from $2,000 to $1,000,000, it is a solid option for both small businesses looking for a quick influx of cash for mall purchases and larger companies looking to shore up capital ahead of a major purchase. The company is perhaps best though for small businesses – especially ones with irregular cash flow - due to the educational resources it offers, the large number of lending providers it uses, and the flexible loan terms and repayment options.  
  • Funding Amounts - LendingTree facilitates loans from $2,000 to $1,000,000
  • Minimum Requirements - Specific requirements tend to vary between loan providers on LendingTree. Still, businesses should plan to have a business license, a previous bank statement, a recent balance sheet, legal documents proving ownership of the company, personal and business tax returns, and any documents that show outstanding debt. Some loan providers may also ask for credit scores, and typically look for one in the “fair” range (630-689).
  • Repayment Terms and Fees - Lending Tree’s partners offer repayment terms that vary from 3 months to 15 years. APRs tend to range from 5.99%-35% depending on the borrower’s credit score and the terms of the loan.
  • Funding Time - Receiving a loan on Lending Tree is quick and easy. You fill out a basic questionnaire about your company and your financial history which typically takes just a few minutes. Once you’re done, LendingTree will automatically display at least four matches for you to choose from. Funding can be approved even within a few hours, and depending on the company, you can receive the funds as soon as in a few days.
  • Bottom Line - LendingTree’s business model is all about getting banks to compete for you, and offer competitive rates that you’ll benefit from. The company offers an easy to fill out and process application process that should have you receive a loan in no time, with flexible rates and terms that you can make work for you.

Read our full  LendingTree review to find out more.


For certain purposes, invoice factoring is one of the ways a business can finance itself by gaining access to their unpaid customer invoices as instant cash by paying a small fee. While there is much to consider, those looking at invoice factoring as a potential solution for their business would be smart to start researching the available options now.