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American Receivable Review: Best Factoring Service for Small Business

American Receivable Review: Best Factoring Service for Small Business
Credit: American Receivable

We recommend American Receivable as the best factoring service for small business. We chose American Receivable from among dozens of factoring services. To understand how we chose American Receivable, see our methodology and a list of factoring services on our best picks page.

American Receivable offers flexible short- and long-term factoring services at competitive rates with fast, reliable funding. There are no strict minimum requirements, either, making this provider ideal for small businesses that are struggling with cash flow and having trouble qualifying with other providers. The company has been helping small businesses with their factoring needs since 1979.

American Receivable's fees start at 1 percent of the total invoice value. There are no application, maintenance or early termination fees. The company initially pays 95 percent of invoice values up front, sending in the balance after customers pay. American receivable is also a nonrecourse factoring service, so you are not responsible for any unpaid invoices.

American Receivable makes it easy for small businesses of all types and with all credit ratings to qualify for factoring. The company will look at your business as a whole, whereas many factoring companies require you to meet a set of rigid minimum requirements before they will even look at your application.  

First, we like that the company focuses on your customers' creditworthiness, not your business's revenues or credit history (or your personal finances or credit score). Although the company does require financial information about your business, this is not the sole consideration as to whether you get approved. This makes American Receivable ideal for small businesses, whose numbers typically automatically disqualify them from most factoring companies but who need a factor to help them with those numbers in the first place — it's a catch 22 of sorts!

Another reason we like American Receivable is that it offers generous factoring terms, allowing the company to truly help your business with its cash flow needs. Many companies limit the number of invoices you can submit and the dollar amount of those invoices, particularly if you are a small business. However, American Receivable does not have any minimum requirements and can fund up to $4 million in invoices for a single business. 

American Receivable also wins when it comes to flexibility. Whereas many factoring services won't accept invoices that are more than 60 days past-due, American Receivable goes the extra mile by approving invoices that are up to 120 days past-due. This makes perfect sense for small businesses that wish to get both past-due and delinquent accounts off their hands and quickly turn those accounts into cash.

There are two ways to submit an application to American Receivable: online or via fax by printing out the PDF form.

The easiest way is to submit the application online. It is a comprehensive application, so you'll need legal information, such as your business's name and any DBAs ("doing business as" names), your business structure, and your federal ID number. You'll also have to provide information on all officers, owners and directors of your business; indicate any changes in ownership or business name in the past 12 months; and describe any issues, such as lawsuits, bankruptcies and back taxes owed.

American Receivable will also need details about your receivables and banking information. This includes the number of invoices and the average amount to be factored every month, if other invoices have been factored in the past, and any past due taxes or liens. 

In addition to the application form, American Receivable requires the following documentation:

  1. First page of articles of incorporation
  2. DBA, assumed- or trade-name certificate 
  3. Accounts receivables
  4. Accounts payables
  5. Most recent profit-and-loss statement and balance sheet 
  6. Current customer listings with contact names, email addresses, and telephone and fax numbers
  7. Copy of driver's license

We like that American Receivable allows you to submit these files electronically. You have the option of attaching them to the application form or sending them separately in an email. This will save you a ton of time over having to fax or physically mail these documents, which some factoring services require.  

Typically, American Receivable will process your application within 24 hours. 

Editor's Note: Looking for information on factoring services? Use the questionnaire below, and our vendor partners will contact you to provide you with the information you need:

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American Receivable has one of the simplest factoring services available to small business. Here's how it works:

  1. You submit an invoice or invoices to American Receivable.
  2. American Receivable quickly funds part of each invoice within 24 hours.
  3. Your customers pay American Receivable.
  4. American Receivable sends you the remaining balance of the invoice or invoices.

After you submit an invoice, American Receivable will advance up to 95 percent of that invoice's total value up front. We like that American Receivable outdoes most other factoring services in this regard, as the average advance rate is only 70-90 percent of invoice values. This is great for small businesses that need as much cash as possible, as soon as possible. 

We also like that American Receivable offers a ton of flexibility when it comes to submitting and funding invoices. You can submit both current and past-due invoices, even delinquent accounts that are up to 120 days past-due. Even better, you can also submit new invoices right after customers make purchases. This is a great option if you need funds to fulfill an order or provide a service.

Another advantage of using American Receivable is that it offers nonrecourse factoring. This means the company takes all the risk for invoices it buys from you, so you don't have to worry about paying those invoices back if customers bail. For more information on nonrecourse and other types of factoring, check out our Factoring Buyer's Guide

We also chose American Receivable because it helps small businesses get back on track with their cash flow. In addition to offering factoring services, American Receivable works with a network of banks to help businesses obtain traditional loans. The company also offers cash-management tools and one-on-one services to help with the struggles of running a small business and reaching financial goals.

As a small business, you need a factoring service that takes into account your small business budget. That's where American Receivable shines.

The company offers a competitive rate starting at 1 percent of total invoice values, depending on your business' specific needs. Long-term customers can take advantage of even better rates, going as low as 0.8 percent. This can result in huge savings for small businesses, considering the average cost of factoring runs anywhere from 2-6 percent of invoice values, plus transaction fees per set amount, such as per $1,000. 

Although American Receivable requires a factoring contract, we like that there are no early termination fees if you decide the service is not for you. There are also no application, startup, maintenance or any other types of hidden fees.

Because you are dealing with a lot of money — and your business's and customers' private information — you need a factor that provides excellent customer service. 

We like that American Receivable works with small business owners on a one-on-one basis. This means you'll get your own adviser, a dedicated representative who will both help you get started and be your point of contact for any questions, issues or concerns through the life of your contract. This representative can also set you up with other services that the company offers to help you run your business, become more profitable and manage your cash flow.

Another reason we like American Receivable is that you can reach the provider using your preferred communication channel. There are several ways to get a hold of the company and your personal adviser: by phone using a toll-free or local number, live chat, internal message system, email and fax. Once you're a client, you can also log in to your dashboard to contact your adviser.

To give us an idea of the company's quality of service, we called American Receivable ourselves, posing as small business owners looking for a factor. We were very much pleased with the experience. The representative we spoke with was very knowledgeable and did not push us to fill out an application or hand over our information. Instead, we were able to ask and get answers to a wide range of questions regarding the service, pricing terms and other important details.

Although we chose American Receivable as the best factoring service for small business, there are a couple of reasons why some small business owners may want to look elsewhere.

As mentioned above, when American Receivable purchases customer invoices from you, those customers will be required to pay the company, not you. Typically, you'll need to send out what's called a notice of assignment letting customers know about the change and to redirect their payments to American Receivable. If you are a business owner who doesn't want your customers knowing that you're using a factoring company or doesn't want to subject them to the inconvenience of sending payments to a third party, American Receivable is not for you. Instead, check out other factoring services that let customers continue paying you. To do this, you would either forwarding payments to the factor or set up a P.O. box in your name from which the factor can collect payments.

Another concern with American Receivable is that the application asks for more than just the business owner's personal information. You'll also need to provide information and Social Security numbers for the spouses of all owners, directors and officers, including yourself. If you are uncomfortable with divulging these details, contact a customer service representative to see if this information is absolutely required for the type of factoring you are seeking.

The application also asks for your banking information, such as which bank you use and your account number. Although this sounds alarming at first, note that many factoring services ask for this information to fund your invoices. This way, they can directly send you the money and it will appear in your account within 24 hours.

Another limitation to American Receivable is that its website does not contain a lot of information about the company's service terms. There's some information on the company's history and factoring services, but you won't easily find pricing information or advance rates. There are no FAQ or self-help sections, either, so you'll need to contact the company for more information or, if you're a client, log in to your dashboard to find some of the information you need.

Ready to choose a factoring service? Here's a breakdown of our complete coverage:

Editor's Note: Looking for information on factoring services? Use the questionnaire below, and our vendor partners will contact you to provide you with the information you need:

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Sara Angeles
Sara Angeles

Sara is a tech writer with a background in business and marketing. After graduating from UC Irvine, she worked as a copywriter and blogger for nonprofit organizations, tech labs and lifestyle companies. She started freelancing in 2009 and joined Business News Daily in 2013. Follow Sara Angeles on Twitter @sara_angeles.