Invoice Factoring vs Bank Loans | Why Choose Factoring?

Man Holding Money & Getting Paid for His InvoicesAre you looking for the best financial service for your business? When your business needs immediate funds, most business owners tend to choose banks. Not only can banks take possession of your business assets for funding, but also require you to jump through hoops just to to apply for funding.

3 Reasons to Choose Invoice Factoring over Bank Loans

Rather than choosing a bank for your business’s financial needs, consider invoice factoring. Below are just a few of the ways your business can benefit from choosing invoice factoring over a business loan.

1. Invoice Factoring Generates Cash Faster

When you choose financing through a bank, you’ll have to wait anywhere from 30, 60, or even 90 days just to get approved for funding. This can be detrimental to businesses that are really struggling. Without fast funding your daily operations will be put on hold, your employees will not get paid on time, and most likely, they’ll be no money left to pay yourself.

With invoice factoring, your business can get funded in just 24 hours or less. When you choose invoice factoring, your business will work directly with an invoice factoring company to get an up to 96% cash advance on your business’s outstanding invoices.

The invoice factoring company will approve the value of your outstanding invoices based on the credibility of your customers, rather than your own finances, giving your business a better opportunity for funding.

By selling your invoices to a factoring company, you’ll be able to get paid instantly for your work and generate a strong cash flow. You’ll always have access to working capital to ensure that your business will stay afloat during slow times and rapid growth.

2. Invoice Factoring Comes Allows You To Manage Credit

All businesses have some form of debt. To get started as a business, you most likely had to incur some form of financing to stand on two feet. We come across many business owners that let this debt haunt their credit for a lifetime.

By utilizing invoice factoring, your business can start securing a strong source of working capital. The more invoices you factor, the more consistent your cash flow becomes, allowing you to better manage debt and build your credit score back up.

With invoice factoring, you can take your boost credit score over time to a point where taking on a business loan becomes more feasible. Invoice factoring services help set your business up for major potential growth.

3. You Can Avoid Incurring Additional Debt with Invoice Factoring

Just as there are many types of business loans that you can acquire from a bank, there are also many different types of invoice factoring. Non-recourse invoice factoring is a risk free form of funding that puts all of the risk on the invoice factoring company.

When you use non-recourse invoice factoring, the factoring company takes on the risk of repayment in the event that your client does not complete payment on the invoice factored.

This allows you to get a major cash advance, without having to worry about owing those funds back again. This debt free funding solution will help keep your business’s credit safe no matter what happens after the invoice has been factored.

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About the Author:

Robert Bernfeld started in the commercial finance industry in 1974. His early years included positions with Aetna Business Credit and Foothill Group. During the next thirty five years. Mr. Bernfeld established both equipment leasing and accounts receivable factoring companies. He partnered in founding Business Facilitators, Inc. in 1999. Mr Bernfeld graduated from the University of California, Riverside in 1974 and received his Juris Doctorate from Loyola University School of Law in 1977.

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