Factoring Finds Its Footing: Volume, Confidence and Working-Capital Demand Rise in H1 2026

SFNet’s Mid-Year Factoring Survey shows accelerating volume, expanding funds in use and remarkably stable credit performance as inflation, tariffs and higher financing costs reinforce factoring’s role in the working-capital market.

The first half of 2026 presented businesses with a complicated financing environment: resilient consumer spending and business investment on one side, and persistent inflation, elevated interest rates, tariffs and geopolitical uncertainty on the other. For the factoring industry, that combination appears to be generating opportunity.

The Secured Finance Network’s 2026 Mid-Year Factoring Survey shows an industry entering the second half with rising volume, expanding client counts and greater optimism about future business. Total funds in use increased for both large- and small-volume factors, factoring volume grew year over year, and portfolio performance remained remarkably stable.

The survey, compiled by Keybridge, was conducted from July 23 through August 14. It separates certain results between large-volume factors—those reporting at least $2.5 billion of first-half volume (or $5 billion or more in full-year volume)—and smaller factors below that threshold.

Perhaps the clearest indication of the industry's position is sentiment. SFNet's combined Factoring Sentiment Score increased five points from H2 2025 to 66, with confidence improving particularly around portfolio performance and new-business demand.

Volume Accelerates

The headline numbers point to meaningful growth, although the pattern differs between larger and smaller factors. Among large-volume factors, factoring volume increased 26.3% from H1 2025 to H1 2026. U.S. volume rose an even stronger 27.0%, while international volume increased 8.4%.

For the large-volume long-term respondents, first-half volume increased from $64.63 billion in H1 2025 to $81.66 billion in H1 2026.

Small-volume factors also expanded, though at a more moderate pace. Their overall volume increased 6.1% year over year, with 88% reporting an increase. U.S. volume rose 2.8%, while international volume jumped 33.1%.

Among the long-term small-volume respondents, first-half volume increased from $4.48 billion to $4.75 billion. The contrast is noteworthy. Larger factors are experiencing particularly strong domestic volume growth, while smaller factors are seeing some of their fastest expansion internationally. The broader message, however, is consistent: factoring activity is expanding.

More Capital Is Being Put to Work

Funds in use provide another indication of the industry's momentum. For large-volume factors, total funds in use increased 5.3% from H2 2025 and 9.7% from H1 2025. All large-volume respondents reported sequential growth.

The increase among smaller factors was considerably stronger. Funds in use climbed 31.7% from H2 2025 and 30.7% year over year, with a majority of respondents reporting an increase. Among long-term respondents, funds in use reached $1.03 billion, compared with $790 million in both H1 and H2 2025.

Average earning assets also increased. Across recent respondents, average earning assets rose 4.5% from H2 2025 and 14.1% from H1 2025, with 89% of respondents reporting sequential growth. Together, these measures suggest that the increase in reported volume is translating into greater capital deployment rather than simply reflecting transaction turnover.

Clients Are Returning

Client counts provide another encouraging signal. Large-volume factors reported a 3.3% year-over-year increase in first-half clients, while small-volume factors reported growth of 7.9%. That marks a reversal from the full-year 2025 results, when client counts had declined for both groups.

Across all respondents, U.S. clients increased only 0.9% from H1 2025, but international clients surged 34.1%. Long-term respondents reported 2,484 international clients during H1 2026, compared with 1,853 a year earlier.

That growth may be particularly significant in the current trade environment. Tariffs, shifting supply chains and uncertainty surrounding cross-border commerce can lengthen payment cycles and increase businesses' need for liquidity and credit-risk management. Factoring can address both.

Confidence Builds Around Demand and Credit

Factors themselves appear increasingly confident about the market. The industry's 66 combined sentiment score was five points higher than in H2 2025. The demand-for-new-business index reached 73, with 46% of respondents expecting improvement and none expecting deterioration.

Portfolio performance generated even stronger confidence. That index jumped 13 points to 88, with 77% of factors expecting performance to improve and none anticipating a decline. General business conditions produced a more cautious reading of 58. Meanwhile, employee-headcount expectations declined four points to 46, with 23% expecting reductions.

That divergence is interesting. Factors anticipate more business and strong portfolio performance, but they are not necessarily responding by adding employees. It may reflect continued investment in technology and operating efficiency, or simply discipline around expenses.

Small factors were particularly optimistic. Their combined sentiment score was 70, compared with 60 among large factors. Small-volume factors registered a portfolio-performance score of 94 and demand score of 75, compared with 80 and 70, respectively, among their larger counterparts.

Different Industries, Different Factoring Markets

The survey also illustrates how different the client bases of large and small factors have become. For large-volume factors, apparel and textiles remained the largest industry at 28.7% of volume, followed by electronics at 19.5% and transportation/trucking at 15.9%. Electronics gained seven percentage points of share from H2 2025, the largest increase among major industries, while apparel and textiles declined 4.3 percentage points.

Among smaller factors, the portfolio looks markedly different. Transportation and trucking represented 33.4% of volume, while business services and staffing accounted for 30.7%. Together, those sectors represented nearly two-thirds of small-factor volume. Business services and staffing gained 4.8 percentage points of share during the half, while transportation increased two points.

Geographically, the Northeast remained the industry's largest market, accounting for 39% of U.S. factoring volume, although its share declined 3.5 percentage points. The Midwest gained 3.1 points, largely offsetting that decline. Client distribution was considerably more stable, with the Southeast and Midwest each representing 24% of clients.

The Structure of Factoring Remains Stable

Despite the changing economic environment, the underlying structure of factoring showed relatively little movement.

Non-recourse factoring represented 81.6% of total volume and 56.1% of clients in H1. Its share of volume increased only 0.3 percentage point from H2 2025, while its share of clients declined 1.2 points.

Notification factoring presented a more interesting split. It represented 98.5% of clients but only 48.0% of volume. Its share of volume fell 7.7 percentage points from H2 2025 even though its share of clients was essentially unchanged.

Average advance rates increased 27.1 basis points to 86.1%, while average days sales outstanding declined 1.3 days to 44 days. Credit insurance usage was unchanged: half of respondents used partial insurance and 17% reported full insurance.

Growth Without a Credit-Quality Sacrifice

Perhaps the most important result is what has not happened. Volume and funds in use have expanded without a corresponding increase in realized credit losses. Write-offs represented just 0.11% of half-year volume and were unchanged year over year among factors reporting in both periods.

That performance helps explain why the portfolio-performance sentiment index reached 88. It also illustrates one of factoring's fundamental characteristics. The product is built around active management of short-duration receivables, obligor credit and collections. In a period characterized by volatile input costs and uneven performance across industries, that visibility can become particularly valuable.

The tradeoff is cost discipline. Total revenue increased 10.4% year over year, but direct expenses rose 14.1%, meaning expenses grew faster than revenue during the period.  That makes operating efficiency an increasingly important part of the industry's story.

Inflation May Be Creating Demand

The macroeconomic environment helps explain why factoring demand remains strong.

The survey reports Q2 real GDP growth of 1.5%, but underlying private-sector activity was substantially stronger. Real final sales to private domestic purchasers increased at a 4.2% annualized rate, while consumer spending contributed 2.3 percentage points to GDP growth. Business investment remained robust and unemployment stood at 4.1% in August.

Inflation, however, remains a central concern. The report notes renewed pressure from energy prices, tariffs and trade restrictions.  For factoring, inflation can operate in two directions.

Higher costs squeeze margins and can make customers slower to pay. But those same pressures increase the amount of working capital businesses need. A company facing higher inventory, transportation, payroll or import costs may need liquidity well before its customers pay outstanding invoices. That gap is precisely what factoring is designed to bridge.

Unlike financing structures dependent primarily on leverage multiples or projected cash flow, factoring monetizes an existing asset: the receivable. As financing costs remain elevated and banks maintain underwriting discipline, that distinction may become increasingly important for smaller and middle-market companies.

A Constructive Second-Half Outlook

SFNet's H1 results depict an industry benefiting from many of the same conditions creating challenges elsewhere in the economy.

Inflation, tariffs and higher interest rates can pressure borrowers, but they can also increase demand for working-capital liquidity. Supply-chain uncertainty can complicate trade, while increasing the value of receivables financing and credit protection. And cautious traditional lenders can leave financing gaps that factors are positioned to fill.

The industry enters the second half with volume growing, funds in use rising, more clients using the product and exceptionally low write-offs. Factors themselves expect demand to strengthen further.

There are risks. Expenses are growing faster than revenue. Certain industries remain exposed to tariffs and input-cost volatility, while geopolitical developments could affect energy prices and trade flows. Higher rates can also increase financing costs for factors and their clients.

But H1 2026 demonstrates that factoring's relevance often becomes clearer—not weaker—when the economic environment becomes more complicated.

For businesses trying to convert sales into immediate liquidity, the value proposition remains straightforward. And for the factoring industry, the first half of 2026 suggests that increasingly more companies are making use of it.

This article was written with the assistance of an AI tool.