Last updated on March 9th, 2019 at 10:05 am
Factoring companies are a must if you have a small business that deals with much invoicing.
Factoring companies are third party companies what offer you money in exchange for your unpaid invoices.
Such a service can make your bookkeeping easier and get it under control. In this article we will be providing our three (3) top favorites factoring companies.
BlueVine: Over $25K
- BlueVine is highly recommended for any credit lines that are between $25K and $500K.
- BlueVine is more than willing to integrate with newer, less established businesses and will offer a low factor rate and a higher credit line that can be requested if necessary. You will get better pricing by taking this option into account.
- Your clients will pay through BlueVine even though your clients won’t know that.
Client Reviews on BlueVine
Here is a number of reviews from clients that have used BlueVine for their businesses.
Scott Shields of Eco Nuts says: “The set-up is so simple and easy and I received funds quickly within a day or two. If you have good invoices, you have cash. It’s that easy.”
Domenic Venneri of Vokent says: “BlueVine is the only service that has stepped up to today’s online standards and also backed it up with incredible dependability.”
Scott Kuperman of Paint Platoon says: “This was probably the most life-changing service that I’ve come across in my 32-year career.”
Fundbox: Under $25K
Fundbox will advanced the entire 100% of a client’s invoice so that it can be paid off within 12 weeks.
It is best that you, as the client, pay off your loan early if needs be.You also only pay the for the fees for the time tin which you used to borrow for the loan.
Client Reviews on Fundbox
Armando Pantoja of Apan Software: “The integration with QuickBooks is amazing. Click once and you get the money tomorrow.”
Kabbage has a revenue based credit line and gives small, emerging businesses an alternative and flexible factoring.
If you have made at close to $2.5K each and every month and have a very good credit score of above or on 550 then this one is most certainly for you.
You as the client will will meet the minimum requirement to qualify for Kabbage’s financing help if this happens to be the case. It will only take a few short minutes to complete an application online.
Client Reviews on Kabbage
Scott of Global Bake ERP Inc. says: “Using our small business loan, we have bought on several strategic partnerships to expand our marketing and sales throughout the US and Canda.”
Ashley of Ashley Spatula Art and Design says: “With the security of my line of credit, I was able to start a secondary business selling supplies to help pave the way for other artists like me. Without Kabbage, this new venture would not have been possible.”
Margaret of The Aroma Group – SocializeLA.com says: “With my first short-term loan from Kabbage, I funded a campaign to reach my year-end goals without having to tap into my cash flow.”
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What Was the Reason We Chose BlueVine for Invoices over $25K?
With BlueVine, the client will need to change any of their invoices that are unpaid into working capital.
Those of you have done this in the past life believe that this is the best option for their business. The smaller companies do quite a bit of invoicing for their clients as well.
Startup business owners and freelance workers can use BlueVine if they find that their credit score is at least 530. We fully endorse BlueVine for any credit lines that are between $25K and 250K.
For any credit lines that are under $25K, it is recommended that you use Fundbox as it and BlueVine work differently from each other.
Fundbox is great if there is a loan that is short-term you need and has to be returned in intervals that must be paid every week.
While BlueVine will give a capital that is a lump sum to you that will has to be paid by your client on or before the invoice’s due date.
BlueVine will provide an 85-90% advance upfront on your invoice and without any hassles to deal with later on down the track.
The rest will come when your customers pays via BlueVine through the use of their invoice.
Every business model under the sun has its ups and its down, its pros and its cons. With BlueVine, the company can help you, as well as your client, with whatever gaps in their cash flow there might be there might be.
Situations can get very messy if situations are not handled correctly. This would be likely if a said customer does not pay their invoice on the intended due date and/or if you have already spent the advance you have been given.
With Fundbox, however, you will receive 100% straight up and it is not attached to a specific customer when they pay for their invoice. Moreover, weekly payments are seen as mandatory.
BlueVine is known to have a lot of advantages that trumps the traditional way of doing invoices. BlueVine WON’T contact any of your clients. BlueVine will always keep payment records in the name of your business.
This makes it easier so that your customers won’t know about the factoring of their invoices through BlueVine. On BlueVine’s website, it is listed that pricing is done at 1% each week while the percentage is reported to be 5% each month.
The company has said that their fees start at 2.5% each and every month if the credit lines are large and if the customer has used your business before. As for the APR, the advance that BlueVine has is on 40 percent (%).
While this is merely a comparison to what Fundbox has available for amounts that are small of cash that which is between $15K-$25K.
Exactly Why We Chose Fundbox for Invoices Under 25K
Fundbox was established in 2013 to make invoice factoring affordable and effortless. Businesses that have a total of 6 months’ worth of history of accounting will qualify for Fundbox’s services.
There is no need for a credit check which is great for any business that might have a not-so-great credit history.
Fundbox allows you an advance but there is a downside. Any advancements have to be paid back over a period of 12 weeks. The way the advancement works is that it works similarly to having a direct credit line.
Anything you pay back you can just keep taking whatever money is against your line of credit.
A loan with Fundbox is able to help you pay off your loan much earlier with penalties placed against your name or business and you only need to pay fees for whatever time in which you borrowed money.
Fundbox can be described a hybrid program, crossing when it comes to bringing invoice factoring as well as short-term loans together.
They will also extend your credit line by examining a customer’s extended payment on their invoices and then you have to pay back the loan within a period of less or near on 12 weeks.
If it comes apparent that you cannot afford to pay back the loan within the 12-week limit and require a much larger capital infusion, then it recommend that you use BlueVine instead of Fundbox.
Since loans using Fundbox are not linked to any of your clients paying an invoice, Fundbox has no need to contact any of your clients. Your clients will continue to directly pay you.
Fundbox does not have a personal loan guarantee. It is well known that Fundbox excellent rates. Their APR range from 38% all the way to 54% but it depends on whatever rates the business may in fact qualify for.
Customers that repeatedly use Fundbox will always qualify for some of the best rates that have benefits far better than most other factoring companies.
When using Fundbox is essential that you have a bookkeeper app that is supported by Fundbox.
If you cannot use a supported app or have an app that works in association with Fundbox, we would highly recommend that you use BlueVine.
Commercial Capital for Staffing as Well as Transportation > $500K
After reviewing three providers, Commercial Capital is quite possibly the most traditional factor when it comes to invoices.
The rates for factoring when it comes to Commercial Capital ranges between 1.5%- 5% each month before it advances to anything that goes between 70% all the way to 97%.
When it comes to staffing and transportation, many businesses will qualify only for some of the best of 1.5% with some advances being 90% and higher when it comes to Commercial Capital.
At the maximum $500K that BlueVine can offer, it is essential we would strongly recommend using Commercial Capital even you have much larger transactions. Commercial Capital does, however, come with two downsides.
The first is that when you use Commercial Capital, with most cases, where there are large amounts of money involved, you will be paid additional charges that go far beyond the normal rates that are discounted like fees that might be overdue.
if a client or a series of clients are late to pay what they owe on their invoices, and there are the mailing fees that are needed when contacting clients, yourself. While these fees are considered high, they can be considered collective as they add up.
The second downside when it comes to Commercial Capital is that your clients will be contacted by Commercial Capital in order to check off their outgoing or incoming invoices as well as collect any payments that are overdue.
Can I Qualify?
When it comes to qualification requirements, they will vary depending on which factoring company you use and it will also depend on your credit history. There are two main requirements that will be needed that will apply.
The first one is that you will have to invoice clients whether they be commercial clients or government clients for goods and services and the second requirement is that every one of your clients.
Must also be worthy of the credit they could receive which will show professionalism when it comes to qualifying.
Most factoring companies will take it upon themselves to look at a business’ commercial credit and that of many of your clients and then deciding whether they will accept you and your clients as one of their own clients.
In order to get a loan with Fundbox, you have to be a business based in the US for at least 6 months or more and already be using a supported app for bookkeeping in order to send clients their invoices.
Fundbox will look into your business and its strengths financially as well as who creditworthy your customers are when you sign up for an account with them. The website will NOT do a credit check on you personally.
Like with Fundbox, with BlueVine you will need to be a business that is operating in the US. Your clients can come from either everyday businesses or even government fields that are within the US and/or Canada.
You can even have international customers but they have to be able to speak the English language as a whole and that the invoices are in the American currency.
Your business’ credit score has to be 530 or more. Other than these factors, debtors must have a good credit risk. Invoices will need to be paid within 90 days or under that if it is possible.
At the moment, BlueVine does not work with businesses within the healthcare or medical industries.
The one thing that people need to be aware of when they use Commercial Capital is that every client that you have must have a good credit score.
Invoices you send out must be free and your company or business must have not have any serious tax or legal problems.
Another must have is, if you are planning on using Commercial Capital that business owners will need to have experience in the industry if you are a business that is just starting up.
When Will I Receive My Money?
To answer this question will all depend on how speedy the application process is with the service you are considering to use. This will depend which service you choose to use.
What is great is that Fundbox and BlueVine both have a completely electronic application system which allows approval to be done in about two days and plus there is no paperwork to be filled out.
If doing a similar process when it comes to Commercial Capital, documents will need to be submitted and it will need to be looked through by hand.
Once approved, you will be able to able to create a new invoice with the three providers will advance you money right away to you and the money will appear in your back account within a 72 working period.
It only takes a few moments to forge an account with Fundbox and the account will be determined in just hours. Funds will take up to 72 hours to get your bank account.
There is no need for paperwork. Just link the bookkeeping program you are using to the website and away you go.
When signing up with BlueVine, it will only take 120 seconds and your very first funded invoice will be available within 24 hours.
Straight invoices will be accepted just minutes of them being approved. Funds, much like with Fundbox, will take up to 3 days to end up your bank account.
Basic information about your business will need to be provided which will include your business’ address and the business’ Tax Identification which will be needed for tax purposes.
BlueVine also offers ACH (which is free) and wire transfer at $15 per wire transfer. It is also faster than ACH.
No application needed to be filled out when it comes to Commercial Capital so you will need to apply via telephone in order to apply a quote and to send the documentation needed via email, fax or regular ol’ mail.
Required documents will need to include accounts that are receivable reports as well as customer lists that will need to be looked over by the staff of the firm.
The process will take about a week to complete but it will depend. Once you have been approved, funds will take up close to 3 days to get to your bank.
Once you are full qualified with one of the mentioned companies, you will begin to wonder, how much can you borrow at any given time.
Well, with Fundbox the amount that is lowest of the capital is what you can borrow which basically means, it works just like a credit line.
This is ideal for any business that is small but has cash flow gaps that are recurring. BlueVine has lines of credit that go near $100K while Commercial Capital can fund invoices that can be easily in the millions of dollars.
Once you begin repaying, you can still borrow against the credit line. The credit line will represent the most amount of money that can be borrowed at one time.
Like with Fundbox, once you begin to repay what you owe while still borrowing.
Unlike with its follow factors, Commercial Capital has lines of credit that can easily go up to $10M.
How Much Money Can Be Advanced at A Time?
Invoice factoring normally will give your money two parts. The first is an advance that will be upfront while when the client pays their full instalment.
What Is the Overall Pricing of Invoice Factoring?
There is a discount rate that is attached to when you borrow money. The rate can be anywhere between 1.5% and 5% each month.
2. Length of Factoring Period
The factor’s discount can be calculated by guessing how much time it will take to be paid from the invoice.
3. Advance and Reserve
As said before, your money will come to you in two very different ways when you invoice. The first is that get an advanced rate of 70% to 97% on whatever the value might be of the invoice.
While the rest of whatever funds that you have, minus whatever the company’s fees might be and once the client pays.
Other Fees and APR
Once you begin to add a lot of these things into the mix, the amount of invoicing will begin to project out an APR of 28% to 60%. You are probably scratching your heads thinking ‘what is an APR?’ and you’re probably even asking what does it stand for.
It stands for Annual Percentage Rate. It is the amount of money that you might have to borrow over a year. It can either might just be just that little bit higher if you have extra fees.
Invoice Assignments and Interaction with Clients
Invoice factoring the structure of how your client pays. Fundbox is only exception in which you have to pay them directly.
BlueVine along with Commercial Capital are equal to your customer and their invoice payment so in other words, the client that is paying will need to pay BlueVine or Commercial Capital instead of them having to pay you.
Recoursing and Non-Recourse: What’s The Difference?
Non-recoursing means that you are not on the hook if a client does not pay for their goods and services.
There are however, exemptions as well as protections can only get you so far. There are exemptions that can only come into play if your client cannot pay because they have either been bankrupt or insolvency. It is highly recommended that a lawyer be hired to aid you if this occurs.
Has a period that occurs after the due date on the invoice by which the client might be able to pay the invoice back in full.
The 1% fee per week continues during this period. If the client does not pay their invoice in full it is then the responsibility of the business to follow it up.
The terminology for recourse/non-recourse simply does not apply to Fundbox because of the reason that they do not rely on the client to make payment.
The business pays back Fundbox as if it is just a regular loan.
The advantage of using Fundbox is that they do not need to have a personal guarantee.
Because of this, this allows personal assets to remain safe if it becomes apparent that the business cannot repay the loan.
Commercial Capital is a lot riskier than with Fundbox or BlueVine. This is because Commercial Capitals has recourse as well as non-recourse factoring practices.
Software for Accounting and Invoicing
Does not require software to function according.
Fundbox requires a supported app in order for the factor to work accordingly. Apps include:
Commercial Capital does not require software to function.
What Is the Bottom Line for Factoring Companies?
It is evident that Invoicing is ideal to have at your disposal especially businesses that require money that will need to fill in the gaps in their cash flow.
While Fundbox is seen as a great option, it is also best to think about what BlueVine or even Commercial Capital can do for you as well.
There is no right or wrong when it comes to choosing the correct factoring for your business. It will depend on all the factors mentioned in this article.
The WiseSmallBusiness Team is full of industry experts and successful business owners willing to contribute important business articles.