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American Receivable Review

Best Factoring Service for Small Businesses

A Business News Daily Review

Product and service reviews are conducted independently by our editorial team, but we sometimes make money when you click on links. Learn more.

Our research and evaluation of factoring services leads us to again recommend American Receivable as the best factoring service for small business. We chose American Receivable from dozens of factoring companies. To understand how we made our decision, and to see our methodology and a list of factoring services, check out our best picks page.

American Receivable has been in the factoring game since 1979, offering its flexible factoring services at competitive rates. There are no monthly minimum requirements, and you're not required to factor all your invoices; rather, you can choose which ones to send to American Receivable, and it advances funding to you the next business day, giving you fast access to your money. Although it has a one-year contract, you can obtain a release at any time without incurring an early termination fee.

American Receivable's fees start at 0.8 percent of the total invoice value. There are no application or due diligence fees. The company advances up to 95 percent of invoice values and sends you the reserve, minus its fees, the following Monday after it receives invoice payments from your customers.

American Receivable makes it easy for small businesses of all types and with all credit ratings to qualify for factoring. It considers several data points to determine your rate and advance, such as your industry, business type and the dollar amount of invoices you plan to factor each month. Also, there are no preset minimum requirements that you must meet to set up an account.

New businesses, as well as those with less-than-perfect credit, can work with this factoring service, as the company sets credit limits based on your customers' creditworthiness, not your business's revenues or credit history, nor your personal finances or credit score. Although the company requires you to submit financial information about your business and its owners as part of your application, it isn't the sole consideration as to whether or not your account is approved.

American Receivable doesn't require you to submit a minimum number or dollar amount of invoices for factoring each month, and factoring maximums are based on the credit limits the company sets on your customers.

There are two ways to submit an application to American Receivable: filling out the form online or downloading, printing and faxing the PDF form.

The application is comprehensive, requesting your business's legal name and any DBAs ("doing business as" names), your business structure, and your federal ID number. You'll provide information on all officers, owners and directors of your business, including Social Security and driver's license numbers. It also asks you to note any changes in ownership or business name in the past 12 months and to describe any issues, such as lawsuits, bankruptcies and back taxes owed.

American Receivable's application also requests details about your receivables and banking information. This includes the average number and dollar amount of invoices to be factored every month and whether you're currently working with another factoring service or if you've worked with one in the past. You also need to disclose any liens or past-due taxes, as well as any bankruptcies filed by the company or its principals. Signing the application grants the company the right to check both your business and personal credit histories.

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 aging report
  4. Accounts payables aging report
  5. Most recent profit-and-loss statement and balance sheet
  6. Current customer list, including contact names, email addresses, phone and fax numbers
  7. Copy of driver's license
  8. A voided check

The easiest way to submit the application is to fill it out online, since it allows you to upload or email your files electronically. This is faster than faxing or physically mailing copies of these documents, as some factoring services require. 

Once you've submitted the completed application and all associated documents, American Receivable processes it, typically within 24 hours, and sets up your account in approximately four business days.

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 businesses. Here's how it works:

  1. You submit an invoice to American Receivable.
  2. American Receivable funds a portion of the invoice, advancing money to you within 24 hours, and holds the remainder as a reserve.
  3. Your customer sends their invoice payment to American Receivable.
  4. American Receivable deducts its fee from the payment and sends you the remaining balance of the invoice.

After you submit an invoice, American Receivable advances up to 95 percent of that invoice's total value upfront, which is a higher top percentage than many of its competitors offer. You should keep in mind, though, that the advance you're offered may be less than this, depending on your industry, your business type and other factors. On the company's website, it notes that its advance rates usually range from 75 to 95 percent, which is slightly higher than the industry average of 70 to 90 percent of invoice values. When we called as a small business looking for a factoring service, we were quoted an advance of 85 percent.

American Receivable has competitive rates that may be as low as 0.8 percent for 30 days, depending on your industry and your business's specific needs. This is less expensive than the industry average of 2 to 6 percent of invoice values.

However, rates increase after the initial 30-day period, making it more expensive if you have longer repayment terms or customers who are slow to remit payment. In our testing, we were quoted 2 percent for 30 days plus 1 percent more for each additional 15 days until the payment is received. Although this is a good value if your terms are 30 days or less and your customer pays on time, it would cost 4 percent if it takes your customer 60 days to pay or 6 percent if it takes them 90 days.

American Receivable runs Dun & Bradstreet and Experian credit checks on your customers and sets credit limits on the invoice amounts you can factor from them based on their credit. These steps help you avoid factoring invoices from customers with credit issues who may be more likely to pay late or default on their payments.

Although American Receivable requires you to sign a one-year factoring contract, the rep we spoke with told us that there are no early termination fees if you decide the service is not for you. There are also no application, monthly service or maintenance, due diligence, or any other hidden fees.

American Receivable works with small business owners on a one-on-one basis, assigning you a dedicated representative who helps you get started factoring invoices and serves as your point of contact for any questions, issues or concerns that may arise through the life of your account.

You can reach the company using your preferred communication channel: by phone using a toll-free or local number, live chat, email, or fax. Once you're a client, you can also log in to your dashboard to contact your advisor.

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. The representatives we spoke with were knowledgeable and didn't push us to fill out applications or hand over our information. Instead, we were able to ask and get answers to a wide range of questions regarding how the service works, its pricing terms and other important details.

Although we chose American Receivable as the best factoring service for small businesses, 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 are required to pay the company, not you. You send the customer a notice of assignment, informing them that you've entered into a financing arrangement with the company and they need to redirect their payments to American Receivable. Although this is a standard practice among factoring companies, some companies offer alternatives such as setting up a P.O. box in your name or allowing you to forward payments to the company after you receive them. If you don't want your customers knowing that you're using a factoring company or don't want to subject them to the inconvenience of sending payments to a third party, American Receivable isn't for you.

Another concern with American Receivable is that the application asks for more information than some of its competitors. For example, in addition to the personal information for the business owners, you must provide it for all directors and officers. You also must provide the Social Security numbers belonging to the spouses of these individuals.

Finally, American Receivable's website lacks information about the company's service terms. Although it has information about the company's history and how factoring services work, you won't easily find pricing information or advance rates. There are no FAQs or self-help sections either, so you must contact the company for the information you need.

Additional reporting by Sara Angeles and Adam C. Uzialko.

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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Lori Fairbanks

Lori Fairbanks has years of experience writing and editing for both print and online publications. After graduating from Brigham Young University with a Bachelor of Arts in English, she worked as an editor for Creating Keepsakes magazine and then as a freelance writer and editor for a variety of companies, including marketing firms and a medical university. She now writes for Business.com and Business News Daily.