U.S. Factoring Services Market Size, Share, & Trends Analysis Report By Category, By Type, By Financial Institution, By End Use, And Segment Forecasts, 2022 - 2030

Report Overview

The U.S. factoring services market size was valued at USD 147.40 billion in 2021 and is expected to expand at a compound annual growth rate (CAGR) of 8.1% from 2022 to 2030. The current growth can be attributed to the increasing requirement for alternative sources of financing for Small and Medium Enterprises (SMEs) and the advent of blockchain technology and cryptocurrency in factoring services. The COVID-19 pandemic has emerged as a major challenge for the U.S. economy. According to Deloitte’s recent COVID-19 report, several companies across a multitude of sectors are finding suppliers, customers, and financiers to arrange short-term solutions to support their cash flows. Furthermore, travel restrictions and emergency declarations due to the COVID-19 in the country have affected several industries, which is expected to limit the growth of the factoring services market in the U.S.

The increased implementation of Machine Learning (ML), Natural Language Processing (NLP), and Artificial Intelligence (AI) is expected to generate profitable growth prospects for the U.S. factoring services market in the near future. For instance, in July 2021, RTS Financial Service, a U.S.-based factoring company, announced a partnership with PCS Software, an AI-driven transportation management platform leader, to provide better factoring capabilities and fuel savings to PCS Software’s marketplace of API-connected applications. This partnership will drive the disruptive innovation for medium- to large-sized enterprise brokers, carriers, and shippers in Canada and the U.S. These benefits will supplement the growth of the market during the forecast period.

Several fintech service providers in the region such as PayPal, JP Morgan, Morgan Stanley, and Wells Fargo offer factoring services to SMEs and freelancers to ease the financial pressure caused due to delayed payments. This alternative form of financing is likely to be adopted and accepted for factoring receivables. However, new technologies are helping these companies to better serve customers by giving them access to web portals and applications to review and answer common questions related to their accounts. Additionally, benefits such as cost-effectiveness, powerful insights and reporting, and thorough credit evaluation are expected to push the demand for factoring services.

Account receivable financing is becoming more secure owing to several laws. The governments of various states have developed legal frameworks for the use of electronic invoices. This has helped governments collect taxes efficiently, provide efficient factoring tools, and reduce fraud. Moreover, banks and financial services companies are constantly trying to upgrade their technological and operational expertise to provide cost-effective services to their customers and boost the demand for their services. For instance, in November 2020, Nav, a U.S.-based financial services company, launched a next-generation emended finance platform for small businesses. Features of the new platform included dynamic financing profiles and a full-service funding manager team, which would be used to improve predictions, deliver new products, and boost customer engagement and retention.

The rise in the adoption of Distributed Ledger Technology (DLT) among various SMEs and large enterprises, and increased awareness of blockchain DLT applications among various industries, are driving the growth of the regional market. The technology provides several benefits, such as sending and receiving product information transparently and storing customers’ detailed information securely for the next purpose. For instance, Walmart Inc., one of the leading retail corporations in the U.S., has been using blockchain DLT to track and record its product information. These benefits will supplement the growth of the regional market during the forecast period.

Category Insights

The domestic segment accounted for the largest market share of 77.2% in 2021. The segment growth can be attributed to the rapid adoption of the factoring receivable methods in major industries due to its effectiveness. Furthermore, the increasing effectiveness of electronic invoices and the results of the government’s efforts in several states in the region, such as creating a competitive marketplace and creating high-quality jobs, to boost private consumption (to measure the money spent by the consumers in the country to buy goods and services), is the key driving factor for the growth of the segment.

The international segment is expected to grow at a CAGR of 8.8% during the forecast period owing to the rise in open trade accounts, especially from suppliers in emerging economies. The major importers or suppliers in developed countries are considering factoring as a suitable alternative to conventional forms of trade finance, which is further expected to drive the demand for the factoring services in the U.S. and other North American countries. Additionally, a growing number of Chinese manufacturers are moving production to countries in North and South America to avoid ongoing trade wars, which is further expected to boost the growth of the market.

Type Insights

The recourse segment accounted for the largest market share of 61.2% in 2021. This factoring is extensively used in U.S. organizations. It helps the client raise funds in one go rather than waiting for each debtor to come up with the payment. The recourse factoring offers all facilities except debt protection. Furthermore, the recourse factoring services are used by firms who have creditworthy invoice clients and when they want to sell their invoices at the lowest discounts. The fact that firms pay smaller factor fees and receive the maximum money possible for invoices is what makes this segment used widely among businesses.

The non-recourse segment is expected to grow at a CAGR of 8.6% during the forecast period. The growth of the segment can be attributed to the advantages offered by factoring services, such as full credit cover offered by the financing companies and debt security. Non-recourse factoring can be a good option for businesses with a large customer base, as businesses may want to clean up their balance sheet by offloading their accounts receivable. Moreover, small and medium-sized businesses are expected to be leading buyers of this service. These capabilities will supplement the growth of the segment during the forecast period.

Financial Institution Insights

The banks segment accounted for the largest market share of 85.1% in 2021 owing to the growing adoption of blockchain technology platforms by several banks in the U.S. Several banks provide factoring services, such as Wells Fargo and Morgan Stanley, which perform an important trade finance service by helping to convert the user’s receivables into cash, thus helping tide over constraints of cash flow and working capital. Moreover, banks and financial services companies are constantly trying to upgrade their expertise on the technological and operational levels for providing cost-effective services to their customers and boosting the demand for their services.

The Non-Banking Financial Institutions (NBFIs) segment is expected to grow at a CAGR of 9.1% during the forecast period. The growth in the fintech companies and non-banking financial startup companies, such as Coinbase, Ripple, and Toast, Inc., among others, is the major factor propelling the growth of the market in the U.S. For instance, Ripple, an enterprise blockchain company, is using Integrated Ledger Protocol (ILP), an open-source ledger that connects across different banks’ proprietary ledgers through connectors for peer-to-peer transactions. This inter-ledger allows any financial institution to connect its core system to transact within the network. These developments in the region are expected to boost the growth of the segment.

End-use Insights

The manufacturing segment held a market share of 31.9% in 2021. The segment growth can be attributed to the increased funding options for micro and small & medium-sized manufacturing units, improved inventory management, and effective working capital management. Moreover, the growing regulatory scrutiny coupled with enhanced customer satisfaction, as well as enhancing production processes, and the creation of innovative products, which facilitate employees for streamlining work while retaining the precision, are some of the factors responsible for the growth of the segment during the forecast period.

The transport & logistics segment is expected to grow at a CAGR of 8.0% during the forecast period. The segment growth can be attributed to the benefits offered by freight factoring companies, such as paying drivers, buying fuel, fast funding, and value-added support services, which produce the ideal funding solutions for new and growing transportation companies in the U.S. Furthermore, these features continue to propel invoice factoring in the transportation industry even further forward, as a viable cash flow solution increasing its popularity as a form of business financing. Due to this, invoice factoring remains a primary source of funding for the transportation & logistics industry.

Key Companies & Market Share Insights

The dominant players operating in the market include HSBC Group; BNP Paribas; Barclays Plc; RTS Financial Services, Inc.; and TCI Business Capital. Market players are observed to invest resources in R&D activities to support growth and enhance their internal business operations. Companies can be seen engaging in mergers & acquisitions and partnerships to further upgrade their products and gain a competitive advantage in the market. They are effectively working on new product development, and enhancement of existing products to acquire new customers and capture more market share.

For instance, in January 2022, FundThrough, a financial technology platform that solves cash flow challenges for growing businesses through fast invoice payments, announced the acquisition of BlueVine, a fin-tech company that provides online business banking and financing to small and medium-sized businesses. This acquisition empowers BlueVine’s finance and expansion efforts in the U.S. market and doubles the number of clients that will depend on FundThrough to convert unpaid invoices into working capital. This partnership will provide suppliers more opportunities to boost their cash flow, and levels the playing field for small businesses selling to large customers who often have extended payment terms. Some prominent players operating in the U.S. factoring services market include:

• HSBC Group

• BNP Paribas

• Barclays Plc

• RTS Financial Services, Inc.

• TCI Business Capital

• Riviera Finance of Texas, Inc.

• CIT Group Inc.

• Triumph Business Capital

• Breakout Capital, LLC

• Charter Capital Holdings LP

U.S. Factoring Services Market Report Scope

Segments Covered in the Report

This report forecasts revenue growth at the country level and provides an analysis of the latest industry trends in each of the sub-segments from 2017 to 2030. For this study, Grand View Research has segmented the U.S. factoring services market report based on category, type, financial institution, end use:

• Category Outlook (Revenue, USD Billion, 2017 - 2030)

  • Domestic

  • International

• Type Outlook (Revenue, USD Billion, 2017 - 2030)

  • Recourse

  • Non-recourse

• Financial Institutions Outlook (Revenue, USD Billion, 2017 - 2030)

  • Banks

  • Non-Banking Financial Institutions (NBFIs)

• End-use Outlook (Revenue, USD Billion, 2017 - 2030)

  • Manufacturing

  • Transport & Logistics

  • Information Technology

  • Healthcare

  • Construction

  • Others (Media & Entertainment, Energy & Utilities, and Telecommunications)