In this article, we are going to list the 10 largest factoring companies in the US. Click to skip ahead and jump to the 5 largest factoring companies in the US.
Got unpaid invoices you want to turn into cash to fund your business? If you run a business and got hit badly by the COVID-19 recession, you might need to consider invoice factoring. Invoice factoring occurs when a business sells its unpaid invoice at a discount for upfront cash to a third-party factoring company. It is a smart funding solution for business owners who need cash immediately for inventory and operations. Invoice factoring treats qualified unpaid invoices as collateral and the cash you will receive in advance from a factoring company is not considered a debt. Factoring transactions are simple as your invoices are purchased in two installments: first, the factoring company gives 70-90% of the invoice amount and the second installment will be deposited to your bank minus the financing fee. The factoring rates vary depending on the accounts receivable. Yet in general, factoring companies could charge daily, weekly, or monthly.
Invoice factoring is one of the most sustainable alternative ways to grow your business. Easy and fast access to cash flow will not only help a business settle its bills for utilities and rent. But it will also help small business owners to focus on growing their business by concentrating on gaining new clients and consumers. Also, invoice factoring help business owners pay suppliers and avoid inventory constraints. Especially now with the Coronavirus pandemic impacting the revenues of small to medium-enterprises, considering factoring from a transparent and reliable factor could be life-saving for a business. So for a business owner, accounts receivable factoring is a great funding solution to grow their business without having to deal with creditors. To give you an idea, factoring can be used in any industry where goods or services are sold and paid for in 30 to 60 days. Some of these industries are trucking, freight brokers, hospitals, oilfield services, construction, and logistics.
In 2019, the factoring industry was valued at $3,114.42 billion with a projected compound annual growth rate (CAGR) of 7.5% from 2020 to 2027. The global factoring market is expected to reach $9,275.15 billion by 2025. According to the Commercial Finance Association, there was a 10.4% or $87.3 billion increase in domestic factoring volume in 2018. Regardless of the size of the business, one factor that led to the recent growth in the factoring service industry is the tightening of credit with banks. Large-sized companies tend to seek help from a factor despite it being more expensive than a bank loan because factoring companies are more attracted to the strength of the account receivables rather than a healthy financial history. Although Europe conquered the global factoring market by obtaining 65.5% in 2017, the Asia Pacific region is catching up at a steady phase with the accelerating business development mainly led by China. Moreover, small and medium enterprises need alternative financing that won’t break the bank. Nonetheless, the factoring market is a highly competitive industry with a large number of global and local players such as Triumph Business (NASDAQ: TBK), HSBC Holdings plc (NYSE: HSBA), Eurobank (OTCMKTS: EGFEY), and Mizuho Financial Group (NYSE: MFG). For future reference, read on our topic about the 16 largest financial services companies in the world.
In June 2020, the World of Open Account (WOA) surveyed the impact of COVID-19 on factoring and commercial finance firms. It stated that 2/3 of the businesses have felt either high or greatly impacted by the COVID-19 economic downturn. Moreover, the recession affected the firms’ volume by about 50%. The survey also stated that factoring and financial firms believe that the impact of COVID-19 is significantly bigger than that of the 2008/09 financial crisis. In all, 60% of the WOA respondents felt that they will need a year or two to bounce back.
Searching for the best factoring company to help you with your business can feel a bit overwhelming. So we created a list of the largest factoring companies that offers the lowest minimum rates with the allowed maximum account receivables. Although factors determining the top factoring companies differ from the size of the companies they work with, the industries they specialize in, and how quickly they provide money, we decided to focus on the revenue and number of employees a company has. We collected data from RocketReach and sorted the largest factoring companies here in our list. We also included discount rates and maximum account receivables a factoring company offers which are directly available on the factoring companies’ websites. We did the research so you want have to! Here are the largest factoring companies in the US as of today: