Pros and Cons
Is Invoice Finanicing For You?


What is Invoice Financing?

  • Invoice financing uses an asset-based loan to establish the line of credit. That is why the business needs to sell real products.
  • These one-sided billing practices, also known as “net terms,” allow customers to pay for goods and services they’ve already received up to 30, 60, or even 90 days later.
  • In fact, it is estimated that more than 60 percent of invoices are paid late
  • Invoice financing is a type of alternative lending where a business is advanced funds based on its outstanding invoices.
  • With invoice financing, the invoice itself acts as collateral for the advance.

Pros and Cons of Invoice Financing

Pros of Invoice Financing

  • Convenience and accessibility afforded by online invoice financing platforms.
  • Can apply for financing online, the approval process is faster than ever. Oftentimes, businesses can receive funding in as little as 24 hours.
  • Keeps small businesses in control.
  • Business is receiving an advance loan for the amount of the existing invoice.
  • It allows companies to keep extending net terms to their clients and can continue to enjoy positive business relationships without finding themselves stuck trying to bridge a cash-flow gap.
  • Charged a monthly fee (up to a maximum allowed amount). This can be convenient, and affordable, for businesses that are confident they can get paid in a timely manner

Cons of Invoice Financing

  • Business is still the one that has to track down payment, ensuring that the invoice gets paid

  • When the invoice isn’t paid, fees will continue to accrue.

Is Invoice Financing For You?

If you find your business has problems paying its suppliers, which ultimately prevents you from fulfilling customer orders, invoice financing is probably a good choice.

With the speed of setup and less stringent requirements than a traditional loan, invoice financing just might be the right solution to help get operations back on track.

  • Businesses that invoice customers: In order to use invoice financing, a business must have customer invoices that meet a lender’s requirements. Some lenders only allow business and government invoices, while others accept consumer invoices as well.
  • Business owners expanding operations: When companies scale, they often incur expenses before they generate or collect revenue from invoices. This can make it difficult to grow without financing and in this case, both factoring and financing can be a great solution.
  • Companies struggling to collect payments: Invoice factoring companies collect invoices on behalf of the business. While this isn’t the same as a collections company, it may be another option for small business owners who want access to troublesome receivables.

There are many other reasons to use an invoice factoring company, including short-term capital needs and managing the invoicing process. Invoice financing is much more common in certain industries like staffing and logistics. However, every business that invoices customers can potentially access invoice financing.

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