Is Factoring Dying?
Written by: Greg Salomon, President of Oxygen Business Capital
All of us who are in factoring love this business, right?! We feel joy and satisfaction in helping small business owners and being part of the machine that keeps funding companies and keeps us in good clothes and nice shelter. However, is factoring on the downturn? Have all the other forms of business lending pushed us aside? To be clear, I am writing this as a general factor based in Southern California, and we have our challenges in this state. However, I am also taking into account many of my friends, some in transportation and more in general factoring across the U.S. We have had many discussions over the last few years about the struggles.
The question deserves a serious, fact-based answer: Is factoring dying? The short answer is no. But the traditional model of factoring is undeniably shrinking, while a new, technology-enabled version of the industry is accelerating. I think factoring is not dying, but it is evolving—rapidly, structurally, and permanently.
To understand why, we need to examine the forces reshaping the market: economic cycles, regulatory pressure, fintech disruption, buyer behavior, and global trade dynamics. Together, they reveal a clear picture of an industry undergoing transformation rather than decline.
As we know and are proud of, factoring is one of the oldest forms of commercial finance, dating back to ancient Mesopotamia and later formalized in medieval Europe. Its purpose has always been the same: convert accounts receivable into immediate cash. For centuries, factoring thrived because it solved a universal business problem—slow-paying customers and fast-moving expenses. In the United States, factoring became especially prominent in textiles, transportation, staffing, manufacturing, and distribution. These sectors relied on factoring because banks were often unwilling to lend against receivables, especially for small or thinly capitalized businesses. Factoring filled the gap with a simple, asset-based solution.
But the financial landscape has changed dramatically over the past 20 years. The belief that factoring may be fading comes from several visible trends. Online lenders offer fast, unsecured working-capital loans. Much to our chagrin, merchant cash advances have become ubiquitous among small businesses. Supply-chain finance programs offered by large buyers reduce the need for suppliers to factor invoices. Fintech platforms embed credit directly into B2B marketplaces. Automation and AI reduce the need for manual invoice verification. Consolidation among traditional factoring companies reduces the number of independent firms. These trends have unquestionably reduced the visibility of traditional factoring among many small business owners. But visibility is not the same as relevance. In fact, many of these innovations have expanded the reach of factoring by embedding it into digital workflows.
To understand the real trajectory of the industry, we need to look at the data. According to the FCI Global Factoring Report, worldwide factoring volume reached $3.7 trillion in 2023, up from $3.5 trillion in 2022. Europe and Asia continue to dominate, with China, Italy, France, and the UK leading the market. Europe accounts for more than 60 percent of global factoring volume. Asia is the fastest-growing region, driven by cross-border trade. The United States remains stable, with growth concentrated in transportation, staffing, and construction. Latin America is expanding due to supply-chain modernization and government support. If factoring were dying, global volumes would be shrinking—not growing.
In the United States, the picture is more nuanced. Some segments appear to be declining, including traditional general factoring, small independent factoring shops, paper-based operations, and industries with rapid buyer payment cycles. But other segments are now growing, including transportation factoring, healthcare receivables financing, construction subcontractor factoring, government contracting, staffing and payroll financing, and fintech-enabled invoice finance. My belief is that the U.S. factoring market is not dying; it is specializing.
Why could traditional factoring be shrinking? Several structural forces are responsible. First, banks expanded small-business credit after the 2008 financial crisis, increasing their use of SBA programs and making credit more accessible. This reduced demand for factoring among companies that could now qualify for bank lines of credit. Second, online lenders filled the speed gap. Platforms like OnDeck, Rapid, and Forward Financing, along with about 5,000 MCA brokers to the main MCA platforms, offer fast, unsecured and secured loans—something factoring historically provided more slowly and with more paperwork. As we have painfully experienced, merchant cash advances offer simplicity and speed, even if at a very high cost. Many small businesses chose MCAs over factoring because they required less documentation. Third, many factors, like Goodman Capital, led by Skylar Lane, have experienced eroded “debtor quality” due to Early Pay supply-chain finance lenders like C2FO and SAP Taulia. This takes more quality out of factoring and leaves more of the riskier debtors to share. As well, other programs implemented by large buyers reduce the need for suppliers to factor invoices. Lastly, technology raised customer expectations. Businesses now expect instant onboarding, real-time dashboards, and automated payments. Traditional factoring firms that fail to modernize lose market share.
These forces have undeniably pressured the old model of factoring. But they have also created opportunities for a new model. Fintech has not killed factoring; it has reinvented it. Ask Sam at Factor Genie or Matt at Tank. I think these are happy leaders of factoring-supported services. Modern factoring platforms use API integrations, automated underwriting, AI-driven fraud detection, instant payments, embedded finance, digital invoice verification, and real-time buyer risk monitoring. This new model is faster, cheaper, scalable, and often invisible, embedded inside B2B platforms. Examples include Amazon and Walmart marketplaces offering built-in invoice financing, freight load boards providing instant factoring options, construction software platforms integrating subcontractor financing, and healthcare billing systems offering receivables financing at the point of claim submission. Factoring is becoming a feature, not a standalone product.
Regulatory pressure is also reshaping our industry. States including California, where I am based, as well as New York, Utah, Virginia, Connecticut, and Florida, have implemented commercial finance disclosure laws requiring APR-style transparency for factoring and MCAs. While some updated practices mandated by the states have led to greater transparency and professionalism, they have pushed some lenders out. Regulation is not killing factoring, but it certainly has affected the process and costs. I could argue the MCAs are the bigger reason for this regulatory pressure, but that is for another article on another day.
Industry consolidation is another sign of maturity. The number of small factoring companies is shrinking due to rising compliance costs, technology investment requirements, competition from fintech platforms, pressure on margins, and difficulty accessing capital markets. But consolidation is not decline. It is a sign of industry maturation. Large players such as Triumph and eCapital are expanding through acquisitions and technology investments. Private equity is entering the space, attracted by recurring revenue and asset-backed lending. Factoring is becoming more institutional.
Transportation factoring has gone through some trauma over the last few years, but freight factoring remains one of the largest and most stable segments because carriers are paid slowly, fuel costs require immediate liquidity, brokers vary in creditworthiness, and small carriers lack banking relationships. What is dying is the old model of manual invoice submission and paper bills of lading. Modern freight factoring is integrated with ELDs, automated through load boards, connected to fuel cards, embedded in dispatch software, and supported by instant payments. The product is evolving, not disappearing.
AI is also transforming the industry. Automated invoice verification, fraud detection using pattern recognition, predictive credit scoring, real-time buyer risk monitoring, smart contract-based receivables tracking, and automated collections workflows reduce cost and risk, making factoring more competitive. AI will not kill factoring, but we need to embrace more of it to make us smarter and more efficient.
To be precise, what is dying is manual underwriting, paper-based invoice submission, opaque pricing, slow funding cycles, standalone factoring without software integration, and small factoring-only shops. Platforms like mine are forced to evolve into “business lenders” with more products or possibly be pushed down in revenue. Factoring is shedding its old skin and growing into a new one. Adapt or die.
To wrap this up, it is my belief that factoring is not fading away, but it is certainly transitioning from a traditional, manual, relationship-driven service into a modern, technology-enabled, embedded financial product. Smaller companies like mine have to make the adjustments to stay relevant. The firms that cling to the old model will struggle. The firms that embrace automation, transparency, and integration will thrive. Factoring is not dying. The old way of factoring is dying. And a more scalable, efficient, and intelligent version is taking its place.
Sales Executives Roundtable
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About the Author
Greg Salomon, President of Oxygen Business Capital
Greg's entire 25-year career has been in the non-prime lending space, predominantly with publicly traded companies and well-established factoring companies. Throughout his career, he has generated hundreds of millions in revenue for these organizations. Greg has a Bachelor of Science in Management and a minor in communication from Fresno State.
The views expressed in the Commercial Factor website are those of the authors and do not necessarily represent the views of, and should not be attributed to, the International Factoring Association.