SFNet’s 2025 Year-End Survey Reveals a Market Expanding as Traditional Credit Tightens

The factoring industry entered 2026 with a familiar dynamic, but one that feels increasingly consequential: growth driven not by economic strength, but by constraint elsewhere in the credit system.

The Secured Finance Network’s 2025 Year-End Factoring Survey shows an industry that is expanding across nearly every core metric—volume, utilization, revenue, and client demand—even as the broader economy slows and traditional lending channels become more selective.

In many ways, factoring is doing what it has always done best: stepping in where other forms of credit step back. But the latest data, and the discussion among market participants, suggest something more structural may be unfolding.

A Slowing Economy Sets the Stage

The macroeconomic backdrop for factoring in 2025 was one of deceleration, not contraction. While headline GDP figures earlier in the year suggested resilience, underlying growth slowed materially by year-end. Fourth-quarter GDP was revised down sharply to approximately 0.7%, with “core” economic activity—excluding volatile components—closer to 1.9%, the slowest pace since 2022.

At the same time:

• Consumer spending softened, growing only marginally in recent months
• Labor markets weakened, with job creation falling below replacement levels
• Inflation remained elevated, with core PCE running above the Federal Reserve’s comfort zone

Compounding these pressures, oil prices surged late in the year, with estimates suggesting a 30–40% increase, adding further strain to supply chains and consumer purchasing power. This combination of slowing growth and persistent inflation has created a difficult environment for policymakers and lenders alike. For factoring, however, it has proven fertile ground.

Demand Accelerates as Banks Pull Back

One of the clearest themes from both the survey and participant discussions is that factoring demand is being driven by tightening credit conditions elsewhere. As banks and traditional lenders become more selective, many borrowers, particularly in the middle and lower-middle-market, are finding themselves unable to access revolving credit facilities or ABL structures. Factoring is filling that gap.

Participants noted a significant increase in new deal opportunities, driven by:

• Borrowers no longer qualifying for bank or ABL financing
• Companies experiencing tighter liquidity conditions
• Extended payment cycles from account debtors

Perhaps most importantly, payment terms are lengthening. Where 30-day cycles were once the norm, many businesses are now facing materially slower collections. As one participant observed, companies are increasingly unable to operate within traditional working capital cycles. This shift is fundamental—and it is directly fueling demand for receivables financing.

Volume Growth: Strong, but Worth Contextualizing

The survey data confirms this demand surge.

Factoring volume increased meaningfully across respondents:

• Full-year volume rose approximately 16.6% year-over-year
• U.S. and international volumes both expanded, with international activity showing particularly strong growth
• Overall volume among long-term respondents climbed from $119.4 billion in 2024 to $139.2 billion in 2025

At the same time, funds in use and earning assets increased sharply, reflecting greater utilization across portfolios:

• Funds in use rose 17.6% year-over-year
• Average earning assets increased 16.9% year-over-year

Client Dynamics: Growth, Then Consolidation

Client trends present a more nuanced picture. On a half-year basis, the number of factoring clients increased significantly:

• Client counts rose 17% year-over-year in H1 2025

However, full-year data shows some softening:

• Total clients declined modestly (-5.1%) from 2024 to 2025

This apparent contradiction reflects an important industry dynamic: consolidation.

Participants pointed to significant changes in key sectors, particularly transportation and trucking, where smaller operators are exiting the market or being absorbed into larger platforms. This consolidation reduces the number of clients even as overall volume increases. In other words: fewer clients, but larger relationships.

Transportation and Energy: A Key Pressure Point

Nowhere is this dynamic more evident than in transportation. The sector remains a cornerstone of factoring activity, but it is undergoing significant pressure from multiple fronts:

• Rising fuel costs driven by higher oil prices
• Labor shortages, particularly among drivers

Participants noted that invoice pricing in transportation has increased over the past several months, reflecting these pressures. At the same time, carriers have been experiencing labor shortages due in part to recent government immigration policies. These developments are reshaping the industry and, by extension, factoring demand.

Structure of the Market: Recourse, Non-Recourse, and Notification

The survey also provides insight into how factoring structures are evolving.

• Non-recourse factoring accounts for approximately 86.8% of volume, but only about half of clients
• This indicates that larger clients—and larger transactions—are disproportionately concentrated in non-recourse structures

Meanwhile:

• Notification factoring represents over 95% of clients, reinforcing its dominance in the market
• Advance rates remain stable at approximately 85%, providing consistent leverage for borrowers
• Days sales outstanding increased slightly to ~46.8 days, reflecting slower payment cycles

These trends highlight a market that is both stable in structure and evolving in scale.

Profitability: Strong Revenue, Improving Efficiency

Financial performance across the industry was notably strong.

• Total revenue increased 19.3% year-over-year
• Revenue as a percentage of volume stood at approximately 1.72%

At the same time:

• Direct expenses declined meaningfully
• Pre-tax income improved modestly

The composition of revenue remains consistent:

• Service fees account for roughly 64% of revenue
• Net interest contributes approximately 35%

This reflects a key distinction within factoring:

• Transportation-focused factoring tends to rely on flat fee structures
• Commercial factoring often incorporates interest-based pricing

Credit Performance: Exceptionally Strong

Perhaps the most striking data point in the survey is credit performance.

• Write-offs remained extremely low at approximately 0.01% of volume

This is significantly below charge-off rates in traditional C&I lending, as shown in the historical comparison chart on page 18 of the report.

Participants attributed this outperformance to:

• Strong collateral verification processes
• Continuous monitoring of receivables
• Tight operational controls

Sentiment: Positive, but More Measured

The factoring industry remains optimistic, but less exuberant than in prior periods.

• The combined sentiment score stands at 61, down modestly from prior periods, but still firmly positive

Key drivers include:

• Softer expectations for general business conditions
• Continued strength in demand for new business
• Stable outlook for portfolio performance

Notably:

• No participants expect a significant decline in demand
• Most expect conditions to remain stable or improve

This reflects a shift toward cautious optimism—a recognition that while growth continues, risks are increasing.

Looking Ahead: 2026 and the Expansion of Factoring’s Role

As the industry looks forward, several themes are likely to define the next phase of factoring.

1. Continued Demand Growth

Tighter bank credit and extended payment cycles are expected to drive sustained demand for factoring.

2. Structural Expansion

Factoring is increasingly becoming a primary financing tool, rather than a fallback option.

3. Industry Consolidation

Client consolidation—particularly in transportation—will continue to reshape the market.

4. Integration with Supply Chain Finance

There is growing interest in expanding factoring into broader supply chain finance solutions.

5. Macro-Driven Opportunity

Slower growth, persistent inflation, and energy volatility will continue to create conditions favorable to receivables financing.

A Market Stepping Into a Larger Role

The story of factoring in 2025 is one of expansion—but also evolution. The industry is not simply benefiting from temporary dislocation. It is increasingly becoming an essential component of the working capital ecosystem.

As traditional lending tightens and supply chains grow more complex, factoring is stepping into a larger, more strategic role. And as one factor noted: “We’re not just seeing more deals—we’re seeing different deals.”

In a slowing economy, that distinction may define the future of the industry.