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Factoring Rates Comparison – The Essential Guide

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Certain small businesses, like wholesalers, trucking owner-operators, and medical practices, don’t get paid for weeks or months. The company delivered the goods or services, invoiced the customer, and now waits to get paid.

While waiting for payment, the business still needs to cover expenses like rent or purchasing inventory. Payment delays can cause significant cash flow shortages, jeopardizing the business.

Small business owners might use invoice factoring to turn their receivables into instant cash. The drawback to factoring is that it is expensive, especially if you don’t know how to compare fees.

This article aims to give you the tools and knowledge to understand factoring and compare rates to determine if it’s right for your business. We’ll help guide you with answers to these questions:

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    What is Invoice Factoring?

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    Invoice factoring, also called accounts receivable factoring, is a business financing strategy where a company sells unpaid invoices for an immediate cash advance. Businesses sometimes wait weeks or months before getting paid. Invoice factoring lets them access that capital sooner.

    Most companies use invoice factoring as a near-term financing solution to solve immediate cash flow needs like payroll or rent. Factoring isn’t a loan, and the business doesn’t incur any debt.

    When a business factors accounts receivable, it receives a cash advance for the partial value of the invoice. Factoring requires working with a third-party financing institution, called a factoring company or factor, that purchases the invoices and sends the cash advance.

    After selling the invoices, the factoring company assumes ownership of the invoice and handles collecting from the business’s customers. Once the customers pay their invoices, the factoring company releases the remaining amount minus their fees.

    Businesses from various industries use A/R factoring to get paid early on outstanding invoices. Some of the most common industries include trucking companies, wholesalers, suppliers, shipping companies, and more.

    What is a Factoring Rate?

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    The factoring rate is the fee a business pays for the factoring service – and how the factoring company makes money. You’ll sometimes see the factoring rate called a factor rate or discount rate.

    Any business considering invoice factoring must understand how factoring rates work to estimate their costs accurately. You can think of the factor rates as a sales discount, which is why it’s also called the discount rate.

    Let’s say a company wants to factor accounts receivable totaling $25,000 and has a factor rate of 2%. In this case, the business sells unpaid invoices worth $25k at the discounted rate of $24,500. The $500 is the money the factoring company makes.

    Now, it is unlikely that a business gets advanced the entire $24,500 in cash. The actual amount it receives depends on the advance rate.

    What is an Advance Rate?

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    In invoice factoring, the advance rate is the percentage of the invoice’s value that the company receives in a cash advance. Most advance rates range from 70%-95%, but some companies offer a 100% advance rate in specific scenarios.

    Continuing the example from above, a business factored $25k in receivables at a 2% discount rate for a total of $24,500. Let’s say the advance rate is 90% – the business’s cash advance is 90% of the $24,500, which works out to $22,050.

    The remaining amount goes into a reserve account until your customers pay their invoices to the factoring company. Once they pay, the company releases the reserve minus any additional fees.

    The two most important numbers to know in invoice factoring are the factor rate, how much it costs, and the advance rate, how much you receive. The whole point of factoring is to turn the money a client owes you into immediate working capital, so you want as high of an advance rate as possible.

    What is an Invoice Factoring Company?

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    An invoice factoring company is a financing institution that purchases invoices at a discounted rate in exchange for providing upfront cash. The factoring company then becomes responsible for collecting the invoice amount.

    In some ways, the factoring company acts as a business’s back-office accounts receivable. Here are some of the key differences between different invoice factoring companies.

    Factoring Fees

    The first thing to consider is the cost. Invoice factoring will always be an expensive way to secure financing – but some companies are far more expensive than others. You want to make sure that you can afford the fees and that the cost of financing is worth it for your business.

    Recourse vs. Non-Recourse

    Recourse factoring means your company is liable if your customers default on their invoices. Each agreement specifies how long customers have to pay before it becomes a bad debt invoice (i.e., past due 3 months, 6 months, etc.) When an invoice crosses the final date, the company must repurchase the invoice. At this point, the business can try to recoup its losses through collections since it owns the debt again. However, in most cases, it just becomes a loss.

    With non-recourse factoring, you don’t have to pay if your customers default for a specified reason. Some non-recourse agreements only apply if the client defaulted due to bankruptcy. Other non-recourse agreements go beyond bankruptcy but are still stringent regarding when non-recourse applies. Non-recourse factoring is more expensive, but the added protection might make it worth it.

    Notification Factoring

    Some factoring companies will notify your customers when they purchase the invoices, and others will not. If you don’t want your customers alerted when you sell their invoices, look for a company that doesn’t notify them.

    Additional Services

    Some invoice factoring companies stand out because they offer enhanced services to help you process invoices. Some additional services to consider when looking for a factoring company include:

    • Easy invoice uploads.
    • Integration with your accounting software.
    • Credit checks on your customers.
    • A/R processing tools.
    • Online portals or mobile apps for convenient processing.

    What rates do the Best Invoice Factoring Companies offer?

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    Factor rate comparison is a little tricky. Most companies publish a range of factoring rates, but in most cases, you won’t find out your rate until you apply.

    Also, keep in mind the advance rate is important as well. We include the factoring rates, advance rates, and minimum qualifications for the best factoring companies to help you compare them. You want to understand the costs and benefits when finding the best invoice factoring company for your business.



    • Advance Rate: 85%-95%
    • Discount rate: 0.75% – 5%
    • Funding time: 24 hours to 3 days.


    • Time in business: N/A
    • Minimum revenue: $15k.
    • Minimum credit score: N/A

    altLINE is the invoice factoring wing of The Southern Bank Company, based out of Alabama. Since the community bank funds altLINE’s invoice factoring, it can keep rates competitive.

    The factoring company’s advance rates range from 85%-90%, and their discount rates start as to allow as 0.5%. The discount rate caps out at 5% if customers take longer than 30 days to pay their invoices.

    altLINE does not offer invoice factoring to trucking or freight companies, which is uncommon in invoice factoring. It does offer excellent rates for all other industries, though.

    Riviera Finance


    • Advance Rate: up to 95%
    • Discount rate: start at 2%
    • Funding time: 24 hours


    • Time in business: N/A
    • Minimum revenue: N/A
    • Minimum credit score: N/A

    Riviera Finance offers non-recourse factoring, and it is one of the longest-running factoring companies available. The company’s unique credit guarantee sets them apart from other factoring companies.

    The company’s credit management service guarantees credit on all invoices, so Riviera Finance assumes the risk as the credit manager. Companies factoring invoices through Riviera get peace of mind knowing they are not responsible if a customer doesn’t pay their invoice.

    Riviera Finance offers a convenient online portal with 24/7 access to your invoice information. The company uses integrated tools to provide support as an accounts receivables partner.

    It’s also a good option for businesses that need funds quickly. Once approved, the company provides funding for invoices within 24 hours. Advance rates go up to 95%.



    • Advance Rate: up to 100%
    • Discount rate: Starts at 1%
    • Funding time: Same day to 48 hours


    • Time in business: N/A
    • Minimum revenue: N/A
    • Minimum credit score: N/A

    eCapital Commercial Finance provides several business financing products, including invoice factoring. The company is great for startups and younger businesses as it doesn’t have minimum requirements that would typically exclude those businesses.

    The factoring company offers advance rates of up to 100%, one of the best in the industry. Discount rates range from 1% to 5%, and they currently offer a 90-day trial period.

    eCapital offers both recourse and non-recourse invoice factoring. The company provides some of the quickest funding times in the industry, with same-day funding possible in some cases.

    Invoice factoring customers gain access to eCapital’s database of over 40,000 companies and can run unlimited credit checks. The tool allows small business owners to run credit checks on their customers before factoring their invoices.

    Triumph Business Capital


    • Advance Rate: Up to 100%
    • Discount rate: 1%-4%
    • Funding time: 24-48 hours


    • Time in business: N/A
    • Minimum revenue: N/A
    • Minimum credit score: 500

    Triumph Business Capital specializes in invoice factoring for trucking and freight companies. The trucking industry utilizes invoice factoring more than any other industry.

    Triumph Business Capital offers additional incentives like a fuel card program, insurance, and equipment financing. The company also offers invoice factoring to staffing, oil, gas, manufacturing, telecommunications, and service businesses.

    Triumph’s discount rates range from 1% to 4%, and it offers a 100% advance rate with no reserves. It offers both recourse and non-recourse financing.

    In some cases, it’s possible to receive same-day funding. Complete the online application or call Triumph Business Capital to apply.

    RTS Financial


    • Advance Rate: up to 97% of invoice value paid upfront.
    • Discount rate: Undisclosed
    • Funding time: 24 hours


    • Time in business: N/A
    • Minimum revenue: N/A
    • Minimum credit score: N/A

    RTS Financial provides invoice factoring for various industries but offers special incentives for freight businesses. In addition to helping solve cash flow issues, RTS provides a desktop and mobile app to help trucking businesses manage day-to-day operations.

    The company offers a fuel card program like many freight factoring companies. It can provide up to 97% of the invoice’s value and provides quick funding with same-day funds in some cases.

    The main drawback of RTS is that it doesn’t provide rates upfront, and you need to apply to discover the fees that would apply.

    RTS does not charge ACH transfer fees or invoice processing fees.

    TCI Business Capital


    • Advance Rate: 70%, 80%, or 90%
    • Discount rate: N/A – varies based on when customers pay
    • Funding time: 24 hours


    • Time in business: N/A
    • Minimum revenue: $50,000
    • Minimum credit score: N/A

    TCI Business Capital provides invoice factoring on monthly contracts. You can lower your rate by increasing the volume of invoices you process.

    The company mainly provides financing to business-to-business (B2B) companies in the following sectors:

    • Environmental Services.
    • Government contractors.
    • Heavy construction.
    • Oilfield services.
    • Manufacturing.
    • Renewable Energy
    • Staffing.
    • Telecommunications.
    • Trucking and freight.
    • Utility and pipeline contractors.

    TCI offers a fuel card program for trucking businesses. It also provides some personal touches, including speaking with a representative to find the best package for your needs.

    The company’s fees are volume-based, like many invoice factoring companies. The website doesn’t disclose the exact fee ranges. You must apply to get a quote.

    OTR Solutions


    • Advance Rate: 96%
    • Discount rate: 1% – 4%
    • Funding time: 24 hours, with instant funding possible.


    • Time in business: N/A
    • Minimum revenue: N/A
    • Minimum credit score: N/A

    OTR Solutions (formerly OTR Capital) is one of the leading invoice factoring companies for the transportation industry. The company offers additional services such as equipment financing, insurance, fuel cards, and tax assistance.

    Complementing their invoice factoring service, OTR offers a convenient online portal to check your customers’ credit. Enter the MC number to find the results you need.

    Going along with the online portal, OTR also offers a mobile app. Customers can use the app for uploads, processing data, and adding notes.

    OTR does not have monthly minimums, credit restrictions, or volume limits. It offers both recourse and non-recourse factoring.

    The company offers a consistent flat factoring rate and doesn’t have hidden charges or fees. OTR offers customized factoring programs to meet a business’s unique needs.



    • Advance Rate: 85%-90%
    • Discount rate: Starting at 0.25% per week.
    • Funding time: 24 hours


    • Time in business: 3+ months
    • Minimum revenue: $10k per month
    • Minimum credit score: 530+

    Bluevine offers invoice factoring to small and medium size businesses. It only works with B2B companies, as traditional consumer invoices are not accepted.

    When you register with Bluevine, you can decide which invoices to factor. There are no mandatory requirements on how many or what percentage of your invoices to factor with the company.

    Once you apply and get approval, you can sync your software to Bluevine and begin uploading invoices. You can also upload them manually if you prefer.

    Once you submit an invoice, you’ll receive the funds at the advance rate in 24 hours. You get the rest of the money when your customer pays their invoice, minus any fees.

    The application process takes less than 10 minutes. You can apply online at the company’s website or through United Capital Source.

    How to apply for Invoice Factoring:

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    You can apply for invoice factoring through United Capital Source. Follow these instructions to apply for invoice factoring.

    Step 1: Make sure your customer is reliable

    Factoring invoices only works when your customers pay their invoices on time and in full. Ensure you’re certain your customers will pay before contacting a factoring company.

    Step 2: Gather your documentation

    When you apply, the factoring company needs to review the following documents:

    • Driver’s license.
    • Voided business check.
    • Banks statements from the previous three months.
    • Business tax return.
    • Accounts receivable aging report, Accounts payable report, debt schedule.

    Step 3: Apply

    You can complete our one-page application or give us a call to apply. Either way, you’ll need to provide the information above and the invoice amount you want to sell.

    Step 4: Speak to a representative

    Once you apply, one of our representatives will reach out to discuss the factoring fee, factoring rate, and terms attached to the sale. You’ll get an upfront breakdown of all costs, so you don’t have to worry about hidden fees.

    Step 5: Receive approval

    The entire process takes about two weeks to finalize. Funds will appear in your bank account 1-2 days after completing the application.

    Frequently Asked Questions

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    Here are some of the most common questions and comparing factoring rates.

    What’s the difference between Invoice Factoring & Invoice Financing?

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    While the two terms sound similar, there are significant differences between them. As discussed, invoice factoring is when you sell your unpaid invoices for immediate cash.

    On the other hand, invoice financing is when you receive an upfront amount based on the value of your invoices. You then repay the loan as your customers pay their invoices.

    In invoice factoring, the factoring company owns the invoices and is responsible for collecting payment from your customers. With invoice financing, you still own the invoices, and you collect from your customers.

    Invoice factoring uses a factoring fee, also known as a discount rate, whereas invoice financing likely uses a traditional interest rate. The cost of both forms of business financing tends to run high.

    What should I ask when comparing Factoring Companies?

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    Entering into a factoring agreement requires knowing the full impact on your business. Comparing factoring rates is an excellent place to start, but there are other details to learn.

    Look at customer reviews when shopping for the best factoring company. You’ll want to work with reputable invoice factoring companies.

    Here are the most important questions to ask a factoring company.

    What are the accounting software requirements?

    Many factoring companies require you to connect your accounting program to their system. Ask if the accounts receivable factoring company requires accounting software and, if so, which specific programs are needed.

    What is the advance rate?

    As we discussed, the factoring rate is vital because of how much the factoring services cost. But the whole point of invoice factoring is early access to working capital via a cash advance. You want to ensure you get enough of the invoice’s value to justify spending money on invoice factoring.

    Who owns the debt?

    In most cases, the factoring company owns the debt. But some companies use an asset-based loan model as an alternative to factoring. In those cases, you still get the cash advance based on the invoice value, except you collect from your customers and repay the loan amount to the company. The nuances between factoring and financing are slight but essential.

    What are the additional fees, if any?

    The factoring or discount rate is the primary cost in factoring. However, some companies tack on extra fees, such as:

    • Origination fees.
    • Processing fees.
    • Early termination fees.
    • Invoice upload fees.

    Ensure you know the total costs before agreeing to anything. After discussing the fees with the company, review the factoring agreement carefully. There are sometimes hidden fees tacked on at the end. Some financing experts suggest having a lawyer review to factoring agreement.

    How long is the factoring agreement?

    Most factoring companies operate on a contract, generally from six months to several years. Some companies, like TCI Business Capital, offer month-to-month agreements.

    Knowing how long your company is required to work with the factor is essential. In best-case scenarios, the factoring company becomes a long-term financing partner that helps you grow your business and handles your collections.

    However, you won’t really know if the factoring relationship works for your business until you process invoices with them. It’s nice to have an early exit option if the process doesn’t work for you. Regarding fees, ask about early termination penalties if you were to leave the contract before it expires.

    What are the volume requirements, discounts, and charges?

    Many factoring companies base their rates on anticipated volume, meaning the total value of the invoices. For instance, some companies require businesses to factor a minimum of $15,000 in monthly invoices.

    Not all factoring companies have minimum volume requirements but do offer lower rates the more volume a business does. Most factoring companies also limit the total amount you can factor per month and charge you extra for going over it.

    Am I required to factor all invoices?

    Factoring companies differ in what percentage of invoices they require. Whole ledger factoring means the business must factor its entire accounts receivable.

    Many factoring companies do partial ledger factoring, where a business is only required to meet specific volume thresholds. Spot factoring allows companies to upload invoices as they come in.

    Will you notify my customers?

    Some factoring companies alert your customers when they acquire the invoice, and others don’t. As a small business owner, you might not want customers to know you sold their invoices.

    Ask the factoring company how they handle the collections process and communicate with your customers. You don’t want to risk any damage to the customer relationship.

    Do you offer recourse or non-recourse factoring?

    We discussed this earlier in the article, but as a reminder:

    • Recourse factoring: You’re required to repurchase invoices when customers default.
    • Non-recourse factoring: Provides limited protection on bad debt invoices but costs more.

    Every factoring company has a different policy. Some only offer one form of factoring, while others provide both.

    If you pursue non-recourse factoring, ask follow-up questions on when it applies and what the exceptions are. Non-recourse factoring agreements carry longer terms and lower advance rates.

    Factoring companies run credit checks on your customers in both cases, but non-recourse credit requirements are higher. Usually, if the customer has solid credit, you can trust them to pay their invoice and don’t need to pay the extra cost for non-recourse.

    What are my alternatives to Invoice Factoring?

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    Most small businesses need financing at some point, whether to sustain day-to-day expenses or to power growth and expansion. Invoice factoring is one option to help businesses acquire working capital and stabilize cash flow, but there are other options if it isn’t the right fit for your business.

    Working Capital Loans

    Invoice factoring is a form of working capital financing, but there are also working capital loans, which provide cash to cover business expenses. Various short-term and long-term working capital loans help your business meet expenses and stabilize cash flow.

    Merchant Cash Advance

    A merchant cash advance provides an influx of working capital based on a company’s average credit card sales. The business then repays the advance with a percentage of future credit or debit card sales.

    Business Lines of Credit

    A business line of credit provides a business with funding as needed. It’s like a credit card where the business gets a set credit limit and can draw funds to cover cash flow needs. And speaking of business credit cards, you can also look into the Brex Corporate Card to help with business expenses.

    Revenue-Based Financing

    Revenue based financing provides businesses with working capital and flexible payment terms. The company’s revenue determines the loan amount. The company then repays the loan with a percentage of future revenue. It’s excellent for businesses with inconsistent revenue streams since the payment fluctuates with revenue.

    Other Small Business Loans

    Businesses looking for long-term loans with higher borrowing amounts can look into the following:

     What are the advantages of Invoice Factoring?

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    There are several advantages to factoring receivables. It’s one of the easiest forms of business financing to qualify for – since credit decisions are based more on your customers’ credit than yours.

    Receivables factoring isn’t a loan, so you don’t incur any debt. It’s a viable alternative for companies in urgent need of funding that don’t want to add to their debt.

    When you factor invoices, the factoring company becomes responsible for collecting payment from your customers, saving you time and resources. And don’t worry – factoring companies won’t relentlessly pursue your customers, either. When you work with a company like UCS, your customers won’t even know you sold the invoice.

    The most significant benefit is turning accounts receivable into working capital. Unpaid invoices are like unsold inventory – the longer it goes without converting into cash for your business, the less profitable it becomes.

    What are the disadvantages of Invoice Factoring?

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    The biggest drawback is that account receivables factoring is expensive. Like most near-term and short-term financing, invoice factoring carries higher rates and fees than traditional long-term business financing.

    Due to the complex nature of receivables factoring, it’s also difficult to compare costs to a loan or other forms of financing. Comparing factoring rates helps with understanding the costs.

    While you don’t need good credit for approval, your customers do. If your customers are unreliable and already paying late, you are unlikely to get approved. Receivables factoring works best for established businesses with many partners.

    Factoring accounts receivable is not the only way to avoid late payments and convert invoices into cash. Sometimes all you need to do is improve billing. You can try automating your invoices, giving customers more ways to pay, and improving your collections team’s efforts.

    We prepared a pros and cons list for a quick summary.

    Pros & Cons:

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    • Turn unpaid invoices into cash.
    • Easier to qualify for than a business loan.
    • You can use the funds for a variety of business purposes.
    • Invoices and receivables are treated as collateral.


    • Higher rates & fees than traditional loans.
    • Fees are based on how long customers take to pay their invoices.

    Factoring Rate Comparison – Final Thoughts

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    Invoice factoring is best for small businesses that need an influx of working capital and have reliable customers in their accounts receivable. The costs are higher than a traditional bank loan, but approval is much easier, and the funding time is much quicker.

    Businesses with good credit that can wait for funding will get lower rates with other financing options. However, invoice factoring doesn’t add to a company’s debt, and the factoring company handles invoice collections.

    If you decide to pursue factoring receivables, compare the rates from the top factoring companies to find the best pricing for your company. With a reasonable factoring rate, the cost isn’t that much greater than offering an early payment discount.

    Contact us today to discuss the best options for your business. Our loan experts will provide a complete breakdown of the costs, terms, and conditions so you won’t have to worry about hidden fees.

    We will help you grow your small business.

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