Should You Go With Invoice Factoring or Bank Loans?

One of the major oppositions I hear from potential clients invoice factoring customers is the cost.   They reason that if a bank loan is 9%, factoring fees should be comparable.   I generally begin to say that if a business can get the total amount of working capital they need from going to a bank, they should do it as long as they pay off the debt in a reasonable period of time.   With that being said,  relating bank rates to factoring fees is like comparing apples to oranges.   Well let’s view why below:

• Bank rates are normally based on an annual percentage, as factoring is based on monthly periods
• Factoring is the purchase of a company’s accounts receivable at a discount.  It is not a loan
• Factoring  companies typically offer other services to go along with the financing, such as credit screening for new accounts, expert collections, and  appropriate reports
• Start-ups typically qualify for factoring
• The credit of the individual owners is usually not a factor in prerequisite
• Unlike bank loans, personal guarantees are not required in a factoring relationship
• With factoring, collateral other than the receivables do not need to be pledged
• Accounts receivable factoring offers funding that is only limited by the company’s pool of receivables

As you can see, bank loans and invoice factoring are two different products.

Get your free factoring quote: Contact Ruth Antoine, A  Certified Cash Flow Consultant Follow this link or call us at (888) 771-1219.

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