The Essential Guide to Small Business Factoring Solutions
As a small business, you may feel like you're constantly playing catch-up. You're always looking for ways to grow and unlock your company's full potential. One way to do this is by factoring your invoices.
Factoring is a great way to get the cash you need to run your business. It can help you overcome financial challenges, and give you the breathing room you need to expand.
In this article, we will explain what small business factoring is, and discuss the benefits of using it. We'll also provide tips on how to choose the best small business factoring solution for your company, and review 12 of the best software providers on the market.
What is Factoring?
Factoring is a popular choice for smaller businesses because the process is simple, straightforward, and fast compared to more traditional financing options. In essence, factoring involves a financial transaction where a third party (the factor) purchases your outstanding invoices at a discounted rate. They then collect payment from the customer on those invoices and keep the difference as their fee. This approach is particularly useful for accessing working capital quickly, similar to having a Credit on Invoice, where businesses can use the future receivables as a credit facility.
What are The Benefits of Small Business Factoring?
The benefits of small business factoring include quick access to working capital, speeding up the payment process, and improving cash flow. It's an excellent way to manage accounts receivables efficiently, especially if you're using systems like https://www.appvizer.com/magazine/accounting-finance/invoicing/3-way-matching-invoice to ensure accuracy and consistency in your accounting practices. This method involves matching the invoice, purchase order, and receiving report to process payments, enhancing the reliability of your financial operations.
How to do Small Business Factoring?
To begin small business factoring, identify the invoices you'd like to factor, find a reputable provider, and submit your invoices for approval. Once approved, you typically get funded within a few days. It's also important to consider the potential for Late Fees on Invoices when choosing a factoring provider. Some factors might have policies regarding late payments, which can impact your cash flow and relationships with customers.
How to Choose The Best Small Business Factoring Solution?
Choosing the best small business factoring solution can be tricky. You'll want to look for a reputable small business factoring provider that offers competitive rates and terms. You'll also want to make sure they are transparent in their fees and have sound customer service. Additionally, you'll want to make sure they offer automated invoicing and easy access to your accounts. With that in mind, let's take a look at 12 reputable small business factoring software solutions, their features, key advantages, and possible limitations.
1. FreshBooks
FreshBooks is a cloud-based accounting software designed to help small businesses manage their finances. With its intuitive user interface and free 30-day trial, FreshBooks is an ideal solution for entrepreneurs looking to streamline their financial operations.
Key Features
- Invoicing: FreshBooks makes it easy to create professional invoices with customizable templates.
- Time tracking: This feature allows you to easily track the time spent on projects or tasks so you can accurately bill your clients.
- Expense management: You can easily keep track of all your expenses in one place with FreshBooks' expense management feature. You can also upload receipts and categorize them for better organization.
- Credit card acceptance: With FreshBooks, you can accept credit card payments from customers quickly and securely.
Advantages
- Automated reminders that help ensure that invoices are paid on time by sending out friendly notifications when payment is due or overdue.
- Secure payments: All payments are processed securely using industry standard encryption technology.
- Affordable pricing plans that are tailored to fit the needs of any small business owner's budget.
Disadvantages
The only real drawback of using FreshBooks is that some of its more advanced features may be too complex for some users who are not familiar with accounting software.
FreshBooks
2. FundThrough
FundThrough is a software that helps small businesses to raise money by factoring invoices. It has a number of features that make it an attractive option for small business owners, including the ability to factor large and small invoices, track payments, and receive alerts when payments are due. Let’s have a closer look at what the factoring solution offers.
Key Features
- Ability to factor large and small invoices, giving you the flexibility to access capital quickly regardless of the size of the invoice.
- Real-time tracking of payments so you can keep a sharp eye on your cash flow at any time.
- Automated reminders when payments are due, helping you to stay on top of your finances.
Advantages
- Flexible payment options, allowing businesses to choose from different payment methods such as credit cards or bank transfers.
- Wide range of invoice types accepted: The platform accepts a wide range of invoice types, including organic results, retail debt securities offered, and Patriot Express® Lines of Credit.
Disadvantages
The main drawback is that there may be fees associated with using the service depending on the type of invoice being factored. Additionally, some users may find the process of setting up an account slightly complex or time consuming.
3. Riviera Finance
Riviera Finance is another reliable solution that small business owners can use to factor their business' invoices. It provides businesses with the power to ensure growth without diluting equity or incurring debt. After invoices are submitted and verified, they are purchased by Riviera Finance at a discounted rate, allowing businesses to access cash quickly.
Key Features
- Invoice factoring: Riviera Finance purchases outstanding invoices from clients so businesses can turn their accounts receivable into instant working capital to maintain cash flow.
- Verification services: The company verifies each invoice before purchasing it, ensuring accuracy and reducing the risk of fraud for businesses.
- Flexible terms: Riviera Finance offers flexible terms on its services, allowing businesses to tailor the service to their needs.
Advantages
- Quick cash flow: By factoring invoices with Riviera Finance, businesses can get quick access to cash without having to wait for customers to pay.
- No debt or equity dilution: Because this is not a loan, there is no need for businesses to take on additional debt or dilute equity in order to access capital.
Disadvantages
- Limited availability: The service is only available in the US and Canada, so it may not be accessible for all businesses worldwide.
4. Triumph Business Capital
Triumph Business Capital is a leading invoice factoring company that provides advances on outstanding invoices. With over 7,000 small to mid-size businesses served since 2004, Triumph has become a trusted partner for many companies. Here’s what the factoring solution offers to small businesses:
Key Features
- Invoice management: Triumph allows businesses to quickly access the funds they need without having to wait for payment from customers.
- Small businesses: Smaller companies can take advantage of up to $1 million in financing with the help of Triumph’s program.
- Savings: TruckersB2B members save 2% on factoring with Triumph Business Capital.
Advantages
- Fast payment: By leveraging its custom platform, Triumph is able to provide fast payment on invoices.
- Flexible terms: With flexible terms and no long term contracts required, businesses can use Triumph's services without worrying about being locked into a long term agreement.
Disadvantages
- Limited availability: While Triumph serves over 7,000 small and mid size businesses in the US, it may not be available in all areas or countries.
- Credit requirements: To qualify for invoice factoring with Triumph, businesses must meet certain credit requirements which may be difficult for some small business owners to meet.
5. Bonsai
Bonsai is a business management software solution used by over 500,000 small businesses globally. It provides a comprehensive suite of tools to help entrepreneurs manage their business operations and finances with ease. Whether you're just starting out or running an established business, Bonsai can help you stay organized with your business factoring.
Key Features
- Client management: Easily manage clients, contracts, invoices, and payments in one place.
- Financial tracking: Track expenses, income, profits and taxes with automated reports.
- Invoicing and payments: Send invoices quickly and securely receive payments online with integrated payment processing solutions.
Advantages
- Easy setup: Bonsai is easy to set up and use right away without any technical knowledge required.
- Comprehensive suite of tools: Bonsai provides all the tools you need in one place so you don't have to worry about integrating multiple systems or services together manually.
- Affordable pricing plans that are tailored to fit the needs of different types of businesses regardless of size or budget constraints.
Disadvantages
The main disadvantage of using Bonsai is that it may not be suitable for larger businesses due to its limited feature set compared to more advanced enterprise factoring solutions available on the market today.
Bonsai
6. altLINE
altLINE is a small business factoring solution provided by The Southern Bank. It offers businesses the flexibility of an independent financing company with the cost savings of a bank. With altLINE, businesses can receive an advance between 70% and 90% of an invoice's value that they can use to invest in their business.
Key Features
- Accounts receivable financing: altLINE provides customers with access to accounts receivable financing, allowing them to receive up to 90% of an invoice's value in advance.
- A/R financing allows businesses to borrow against their existing accounts receivable for additional cash flow.
- Asset based lending services that allow businesses to borrow against their assets such as inventory or equipment for additional capital.
Advantages
- Flexibility: altLINE provides customers with the flexibility of an independent financing company while still offering the cost savings of a bank.
- Quick access to funds: Businesses can quickly access funds through altLINE's accounts receivable and asset based lending services.
Disadvantages
- Limited Availability: Currently, altLINE is only available in certain states in the US. So you have to check on their website if you have access to their solution.
- Credit Requirements: To qualify for funding through altLINE, businesses must meet certain credit requirements.
7. TCI Business Capital
Next up in our review of small business factoring solutions is TCI Business Capital. This software provides businesses with an easy to use interface, comprehensive data, and flexible, affordable pricing.
Key Features
- Easy to use interface: TCI Business Capital has a user-friendly interface that makes it simple for anyone to factor their business loans.
- Comprehensive data: The software makes it easy for businesses to make informed decisions about their loan options.
- Flexible and affordable pricing: TCI Business Capital offers competitive pricing, making it an attractive option for small businesses.
Advantages
- With TCI Business Capital's comprehensive data on each loan, businesses can make informed decisions about their loan options.
- The software is very user friendly and easy to navigate, making it perfect for anyone looking to factor their business loans.
- TCI Business Capital offers competitive pricing, making it a great option for small businesses who need help with their business loans.
Disadvantages
The only potential drawback of using TCI Business Capital is the limited availability of some data (e.g., information on past due loans). However, this does not detract from the overall value of the software as a solution for small business factoring needs.
8. Resolve
Next, let's take a look at Resolve as a small business factoring solution. As one of many such tools available today, it is designed to help improve cash flow, provide credit risk analysis, and automate invoicing. With its fast payment system and flexible terms, Resolve promises to be an attractive option for those looking for an easy business factoring solution.
Key Features
- Automated invoicing: Resolve makes it easy to create and send invoices with its automated system.
- Credit risk analysis: Resolve provides credit risk analysis to help businesses understand the risks associated with their customers.
- Quick payment: Businesses can get paid quickly, often within days of sending out an invoice.
Advantages
- Flexible terms: Resolve offers flexible terms so businesses can choose the best option for their needs. This allows them to tailor the solution to fit their budget.
- Provision of expert advice on how to manage cash flow more effectively and efficiently.
- Improved cash flow: With Resolve, businesses can improve their cash flow by getting paid faster than traditional methods of payment.
Disadvantages
The main disadvantage of using Resolve is that it does require a fee for its services, which may not be feasible for some businesses depending on their budget.
9. OTR Solutions
OTR Solutions is another factoring solution available to small businesses. It provides a variety of features that make it a good choice for early-stage or growing businesses. Some key features of OTR Solutions include an easy-to-use interface, a wide range of options and competitive rates.
Key Features
- Easy to use interface that makes it easy for users to navigate the platform and access the tools they need quickly and easily.
- Wide range of options for businesses, including factoring services, fuel management solutions, and back office technology solutions.
- OTR Solutions offers competitive rates on its services, making it an attractive option for businesses looking to save money on their factoring needs.
Advantages
- Businesses can access cash flow more quickly than with traditional financing methods. This can help them grow their business faster and more efficiently.
- OTR Solutions’ services are scalable, meaning businesses can easily adjust their plans as their needs change over time.
- Its data insights can help businesses make better decisions about financial operations.
Disadvantages
- Currently, OTR Solutions only accepts payments via credit card or ACH transfer which may not be ideal for some customers who prefer other payment methods such as PayPal or wire transfers.
10. BlueVine
As a small business owner, you know that having access to working capital can be a real lifesaver. BlueVine is one of the most convenient ways to finance your small business with invoice factoring. Let’s take a look at the key features, advantages and disadvantages of this small business factoring solution.
Key Features
- Invoice factoring: BlueVine allows you to access funds trapped in your unpaid invoices.
- Accounts receivable financing to turn unpaid invoices into working capital quickly and easily.
- Line of credit vs invoice financing: If you're a B2B company and you bill your customers on net terms after the work has been completed, invoice factoring may be the best solution.
Advantages
- BlueVine's user interface is intuitive and easy to use, making it simple for small business owners to manage their invoices and cash flow.
- Fast funding options for quick access to working capital, so that you can keep your business running smoothly.
- Low fees with no hidden costs or long-term contracts, so you don't have to worry about unexpected expenses down the line.
Disadvantages
- High interest rates: While BlueVine offers competitive rates compared to other providers, its interest rates might still be higher than traditional bank loans or lines of credit.
11. American Receivable
American Receivable is another small business factoring solution provider that can be helpful for enterprises that need to get some extra money flow. It has a lot of strong features that make it a great choice for businesses with growth ambitions.
Key Features
- Fast and easy access to funds, with cash available in as little as 24 hours.
- Reliable and secure funding solutions.
- Flexible business factoring services that can be tailored to your individual needs.
- Competitive rates and low cost of their professional services.
Advantages
- With American Receivable, businesses can easily meet payroll without having to worry about slow paying customers or unexpected expenses.
- You can use the solution to upgrade your company’s equipment, take supplier discounts or invest in new products or services.
- American Receivable provides cash flow solutions for entrepreneurs so they can better manage their finances and keep their business running smoothly.
Disadvantages
- Factoring may not be the best method of financing for all businesses, so it's important to do research before deciding if this is the right option for you.
- There may be fees associated with using American Receivable's services, so it's important to consider this when making your decision.
12. Fundbox
Fundbox is another small business factoring solution that provides businesses with the funds they need to grow. It's a reliable choice for businesses looking for an easy and efficient way to get access to capital. With Fundbox, businesses can factor up to $1 million per transaction in multiple currencies and use its user-friendly interface.
Key Features
- Ability to factor up to $1 million per transaction, giving businesses quick and easy access to needed capital.
- Fundbox is available in multiple currencies, making it easier for internationally operating businesses to access the funds they need.
- The platform has a user-friendly interface that makes it easy for business owners to manage their business factoring.
Advantages
- The setup process with Fundbox is simple and straightforward, allowing business owners to get started quickly and easily.
- Fundbox has low fees compared to other factoring solutions, making it more affordable for small businesses.
Disadvantages
- While Fundbox offers a wide range of funding options, some businesses may find that their needs are not met by this provider.
- High interest rates: Interest rates on loans from Fundbox can be higher than those offered by traditional lenders. As with any provider, it's important to compare rates before committing.
Conclusion
And there you have it – small business factoring demystified! As we have seen, small business factoring is a great way to manage cash flow and improve small business profitability.
It can help small businesses grow by unlocking capital that would otherwise be tied up in invoices, and it's becoming increasingly popular due to the range of small business factoring software solutions available. While you could use your own financials and accounts to manage your small business factoring, the 12 small business factoring software solutions we have reviewed in this article offer a range of features that make the process simpler, more efficient and cost-effective.
Whichever small business factoring application you decide to go with, make sure it is the right fit for your small business. We wish you all the best on your small business factoring journey!