Applying for Invoice Financing or Invoice Factoring? Things that You Should Know

Posted by Team Finaxar on Nov 6, 2018 5:37:00 PM


applying for invoice factoring or financing things you should know


Are you considering invoice financing or invoice factoring funding options for your business? Many small-scale businesses face a cash crunch which creates a gap between the targets achieved and targets expected to be achieved. To get back on track, businesses avail business funding options such as merchant credit line, growth capital, invoice factoring and invoice financing.

There can be various reasons why companies could face cash gaps. Operating costs might shoot up as utilities and supplies increase unknowingly. A business might run slower than normal due to a snowstorm. As business might run slower, more cash might be tied in inventory for a period longer than expected. Lack of cash is a sure reason behind the delay in payment of bills.

Instead of bearing the burden of debts, many business owners who wait for the payments, decide to finance most of their operations by borrowing against their assets in alliance with an invoice factoring companies or by selling their receivables.

Invoice factoring has been in use since the early civilization including the Roman Empire and Phoenicia. Since then, merchants have been regularly using factoring by choice to finance their business operations. Factoring is a relatively new business funding option that has emerged as a popular option for small businesses. Today, invoice factoring is being used by construction companies, painting business, creative agencies, and many others. There are many reasons why the demand for invoice financing and invoice factoring is increasing every year.

If your business is facing cash shortage and if your company has many unpaid invoices, invoice factoring is the right choice.


Benefits of invoice factoring

  • Invoice factoring is one of the easiest and fastest forms of funding for small businesses.
  • There is no need to maintain any collateral in order to secure an advance. You can easily qualify for factoring although you have bad credit.
  • Approval of invoice factoring doesn’t take months together
  • Companies who offer invoice factoring collect payments from the customers directly.
  • There is no need for you to constantly follow up with the funding company. Thus you can save more time and invest in other activities.
  • Just like invoice factoring, invoice financing is also a quick form of funding for small business
  • Small business owners can easily sign up for invoice financing option and get the funding approved within minutes

Invoice financing solves cash crunch problems and advances the entire value of invoices. Although invoice financing and invoice factoring are popularly used, there are a few demerits to consider:

  • Invoice factoring can be an expensive option
  • As per the financer, the borrower will have to meet certain qualifying criteria