Invoice Factoring or Bank Loans?
Before deciding which source of funding is right for your business, it is important to know the differences between factoring services and a traditional bank loan. While both can be beneficial, one may be a better fit for your line of work.
Which Type of Financing is Best for Your Company?
As businesses grow, they often find themselves needing additional financing for expansion, meeting payroll, marketing, making more product or to cover other expenses. Sometimes, corporations are financially strong enough to obtain a bank loan as a means of increasing credit. Other times, however, less traditional methods of financing are necessary. For certain companies, traditional bank loans just don’t make sense. This is especially true for business owners that are looking for funding as-needed or don’t want to add more debt to their balance sheet. Banks offer little leverage to meet the additional borrowing needs and can possibly even hurt more than help. Let’s break down what’s best for your business — factoring vs. bank loans.
Invoice factoring is a financing solution that helps companies stabilize cash flow by unlocking the cash sitting in unpaid receivables. This process, also known as accounts receivable factoring, involves treating invoices as collateral, which is sold to factoring companies. Your company then receives the cash in advance with each invoice sold. The amount of capital available grows with your business. As long as you have invoices to factor, funding is available!
Working with a bank is a solid option for many business owners, but the lending market remains tight. If you’re lucky enough to be approved, the loan amount may not be enough to meet your financial requirements. Plus, you’ll have debt to repay.
Factoring companies offer funding for businesses of all sizes and stages. From start-ups to long-established companies, factoring loans are a smart solution to combat cash flow crunches without taking on additional debt.
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What’s the Difference Between Factoring and a Bank Loan?
Invoice Factoring
- No Debt to Repay
- Unlimited Funding Potential
- Fast Approval in 3-5 Days
- Approval Based on Credit Strength of Your Clients
- Startups are Eligible for Factoring Loans
Bank Loans
- Principal & Interest Repaid Over Time
- Funding Potential is Capped by Banks
- Approval May Take Months
- Approval Based on Your Company’s Operational and Credit History
- Very Tough for Startups to Obtain Bank Funding
Yes, Banks Refer Customers to Factoring Companies
Businesses often need additional funding but are unable to meet the stringent borrowing requirements to qualify for a new bank loan. In this case, they are often referred to a factoring company like Factor Finders. In fact, Factor Finders often gets customer referrals from local banks that want their customers to receive the financial help that they are unable to provide. Banks know Factor Finders will serve their customers well by providing a speedy factoring application and approval process.
Is Invoice Factoring Faster Than a Bank Loan?
Yes–much faster. It’s no secret that banks are strict when it comes to loan approval. Not only can they take a very long time, but loan decisions are based on a combination of a company’s previous years’ operating history and the business owner’s credit scores. The loan approval process can take weeks, or possibly longer. Factoring approval decisions can be made in as quickly as 1 day.
Factoring Provides Fast Funding When You Need it Most
Invoice factoring ensures you receive the working capital you need within 24 hours. Factors buy your eligible invoices at a discount and advance you up to 98% of the total amount within hours of verification. The remainder is held in a reserve account. When your customer pays the rest of the invoice, the factor will release the balance on the account minus a small fee for using the service.
If you’ve been declined for a bank loan, join the club! It’s not uncommon for banks to deny small business owners funding, especially if it’s a newly established business. Factors base approval on the credit of your customers since your customers are the ones responsible for invoice payment. Factoring financing is a great solution for bad credit, no credit or companies that want are considering factoring debt. In fact, factoring can provide the financial stability you need to improve your credit score.
Factor Finders works with the best factoring companies across the entire United States. We will match your company with a factoring business that specializes in your market work with you to meet any specific goals or needs of your business.
Think Outside the Bank Loan
Invoice factoring is a simple & debt-free business financing option. Contact us to get started.
Factoring Offers More Flexibility than Bank Loans
Factoring Invoices is a Debt-Free Form of Financing
Conventional bank loans are pretty cut and dry. They loan you an amount of money, which you’re expected to pay back over a specific amount of time in addition to a generally high amount of interest. In order to obtain more cash, you have to add more overall debt to your books. With factoring, you aren’t incurring any more debt–you’re selling a valuable asset. Furthermore, you get to choose which invoices you factor and how often. You aren’t locked into a long-term contract and terms are flexible.
Factoring offers financial solutions that can yield unlimited growth for agencies. Including:
- Credit Protection
- No Debt Added to Balance Sheet
- Collections Services
- Credit Analysis
- Same Day Funding
- Unlimited Funding Potential
Bank loans aren’t your only option.
You could receive cash as soon as today! Call us at (216) 292-5660.
