Factoring has long lived in the margins of small business finance—an often misunderstood, stigmatized tool for companies in distress. But in 2025, it’s becoming a central strategy for managing working capital, especially in key sectors where revenue timing and cash demands are increasingly misaligned.
According to Secured Research’s 2025 Q1 survey of 427 small and mid-sized businesses across the U.S., the use of factoring rose by 22.4% year-over-year among companies with under $50 million in revenue. This includes a 31% jump in construction trades, a 27% rise in staffing firms, and a 19% increase in outpatient healthcare providers using factoring to smooth cash flow.
What’s driving the trend?
1. Widening cash flow gaps: Average days sales outstanding (DSO) across B2B transactions in 2024 climbed to 49.6 days from 44.1 days in 2023, according to PYMNTS and TreviPay data. Meanwhile, expenses—especially payroll—have accelerated. Staffing firms, for example, pay weekly but wait 30–60 days for receivables.
2. Tighter bank credit: Traditional working capital lines have declined due to tightening underwriting standards. Secured Research notes that only 38% of businesses with <$10M in revenue were able to renew or increase their bank credit lines in Q4 2024.
3. Operational volatility: From materials delays in construction to payer slowdowns in healthcare, operational friction is creating unpredictable gaps that factoring fills with speed.
> “We used to bridge receivables with a bank line, but that was cut last year,” said the CEO of a Texas-based HVAC contractor. “Our broker helped us get a factoring facility that pays on our terms—not the bank’s.”
> “For our behavioral health practice, payer reimbursements can lag 45 to 90 days. Payroll doesn’t wait,” shared a Northeast healthcare administrator. “Factoring lets us stop worrying about timing and focus on growth.”
Key sector breakdowns:
– Construction: Subcontractors and trades in the commercial and infrastructure segments are facing historic DSO levels due to delayed inspections, progress payments, and retainage policies. Factoring usage is up as a stopgap and planning tool.
– Staffing: With wage inflation persisting and demand in logistics and healthcare rising, staffing agencies are using factoring to match pay cycles to receivables.
– Healthcare: Specialty clinics, behavioral health centers, and outpatient providers are experiencing longer reimbursement windows as insurers slow claims processing and shift to digital audits.
Factoring also appeals for structural reasons:
– It’s non-dilutive and doesn’t appear as a loan on the balance sheet.
– Approval is based on receivable quality, not borrower credit.
– Funds can be available within 24–48 hours.
From stigma to strategy
Perhaps the most notable shift is perception. In 2022, just 14% of SMB borrowers viewed factoring as a “proactive finance strategy.” By early 2025, that number has jumped to 34%, according to Secured Research.
> “A good factor is a growth partner, not a last resort,” said a broker focused on middle-market staffing. “It’s about matching the finance to the cash cycle—not just plugging holes.”
What brokers are doing differently:
– Educating clients early on when factoring makes sense—before problems arise
– Bundling factoring with other products like equipment leasing and insurance to create full working capital solutions
– Vetting factoring partners to ensure transparency in advance rates, fees, and service
In 2025, factoring isn’t just back—it’s maturing. And for brokers who understand sector nuances, it’s an open door to deeper relationships and recurring income.
In a tightening credit environment where many lenders are saying no, factoring is increasingly becoming the most reliable yes.
