As traditional financing continues to leave small businesses with unmet funding needs, more are turning to invoice factoring, new study reveals.
Leading invoice factoring company Viva Capital says reduced business loan approval and stricter lending requirements, paired with an ongoing need for flexible working capital solutions, created an uptick in invoice factoring. Additional details are available in “How to Start Invoice Factoring: A Step-by-Step Guide,” now live on VivaCF.net.
Factoring just makes sense. Small businesses are wary of debt, but they still need reliable working capital solutions, and traditional loans are often out of reach or insufficient.”
— Greg DiDonna, President and Partner of Viva Capital
THE SMALL BUSINESS FINANCE LANDSCAPE IS CHANGING
The 2026 Small Business Credit Survey reveals shifts in business finance and funding compared to 2025.
> Fewer Full Approvals: Just 37 percent of those applying for business loans are fully approved, down from 39 percent last year.
> Stricter Lending: 46 percent of those denied credit say it’s because lender requirements are too strict, up from 25 percent last year.
> Debt Aversion: Businesses with no outstanding debt have risen from 29 to 31 percent.
> Reliance on Credit Cards: Of those holding debt, 62 percent say they use credit cards regularly, up from 58 percent last year.
> Factoring Use Increase: Businesses using invoice factoring ticked up one percentage point year on year.
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“These numbers reflect what we’ve been seeing on the frontlines,” explains Greg DiDonna, President and Partner of Viva Capital. “Factoring just makes sense. Small businesses are wary of debt, but they still need reliable working capital solutions, and traditional loans are often out of reach or insufficient.”
GROWTH IN INVOICE FACTORING USE ALIGNS WITH BROADER SHIFT
DiDonna notes that factoring works differently from most funding solutions, which explains the uptick.
> Provides Flexible Working Capital: Factoring provides an advance on unpaid B2B invoices and can be leveraged as needed.
> Standalone or Supplemental Funding: Businesses can use factoring on its own or to fill gaps left by traditional funding.
> Greater Accessibility: Approval is based on the creditworthiness of the business’s customers, allowing small businesses to bypass strict lending requirements.
> Avoids Debt: With factoring, there’s no balance to pay back that traps businesses in a debt spiral.
“Many are starting to factor because it provides much-needed relief,” DiDonna adds. “However, we expect most will continue to leverage it to reach their growth goals even after credit requirements relax because they appreciate having access to flexible, debt-free funding.”
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