Why Using Factoring is better than a Loan?

If you are a small, medium, or large business owner and just can’t afford to wait out the 30 to 90 days for your invoices to be paid, you have two main options. You could certainly seek out a bank loan for quick cash, or you could use accounts receivable factoring that doesn’t have a thing to do with your business’s credit. Based on the credit of the debtors your invoices are for, the factor will pay you a discounted amount for the accounts receivable you are selling.

So, why is invoice factoring better than getting a bank loan? For one, the bank loan has to be repaid, while accounts receivable factoring has no further recourse by you unless you allow your debtors to pay you instead of the factor. If this happens, whatever advance you were paid for the invoice will have to be repaid to the factor. For two, it is the option that is ready and on tap for your business. When you don’t have the time to fiddle around filling out applications, factoring can quickly get you the funding you need with much less hassle on your business’s end.

Invoice factoring is a great way to get that venture capital that may be needed, or the money you need to continue business when you have many clients that don’t pay right away. Instead of waiting for these clients to pay before you can afford to do further business or pay whatever costs your business has from month to month, you simply sell your invoices, sort of like selling your assets for less than the value, but a considerable percentage. When your cash balance is showing a shortage for whatever reason, it is just a bit better to use factoring instead of a loan to fund any short falls.