Invoice Factoring vs Invoice Discounting, which business finance option is a good fit for your small to mid-sized business cash flow needs

Accessing small to mid-sized business financing feels more like a luxury in today’s traditional lending space. Banks are not as credit friendly as they were prior to the global economic recession.

Invoice discounting and invoice factoring are both vital cash flow solutions and enable your business to unlock money that is trapped in your accounts receivable invoices. You can bypass traditional bank lending and get immediate cash to run your business.

Instead of waiting 30-90 days for customers to settle their owed bills, factoring enables you to get up to 95% of the face value of your invoices up front, usually within hours of invoicing your customers.

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Immediate Cash Flow Helps Your Business:

  • Cove payroll
  • Purchase supplies
  • Purchase equipment
  • Afford day to day expenses
  • Payoff higher interest loans
  • Stay competitive in your industry
  • Grow your business faster and make more profit

Which type of immediate financing do I choose?

Advantages of Invoice Factoring:

  • Funds released to you by the factor finance company improves your cash flow position and the additional working capital available enables your business to expand.
  • The cash advance grows along with your business. Which means as your business grows, you’ll have access to more and more working capital.
  • Factoring boosts your bargaining power, enabling you to take advantage of early vendor opportunities and discounts.
  • Credit control is outsourced to the finance provider for payment collections and facilitation of the accounts in order to allow you to focus on generating new accounts instead of collecting on monies already owed.
  • Factoring offers a flexible funding solution and can be ideal for new small to mid-sized business start-ups seeking additional working capital.

Advantages of Invoice Discounting:

  • Funds released from invoice discounting by the finance company improves your cash flow position and the additional working capital available enables your business to expand.
  • The facility is administered on a confidential basis, which means you stay in direct contact with your customers, they never know you’re working with a third party finance company.
  • Invoice discounting boosts your bargaining power, enabling you to take advantage of early vendor opportunities and discounts.
  • The cash advance grows alongside your business. Which means as your business grows, you’ll have access to more and more working capital.
  • Funds are released almost immediately, which enables your business to calculate predictable cash flow for real-time operation capabilities.

Other Forms of Factoring:

Non-Recourse Factoring – In this type of factoring agreement the finance provider takes full responsibility of the sales ledger and assumes any risks associated with bad debt. This can relieve your company of dealing with the hassle and worry of customer defaults.

Recourse Factoring – In this type of factoring agreement the finance provider manages your sales ledger without any credit protection. That means if your customers default, you’re liable for all credit costs.

CHOC’s (Client Handles Own Collection) – In this type of agreement, factoring is assumed to be disclosed arrangement with outsourced credit control. However CHOC’s facility keeps the business in charge of their sales ledger. This could be a cost-effective solution for SMEs with in-house accounting systems in place already.

Other Forms of Invoice Discounting:

Non-Recourse Invoice Discounting – Your company retains full control of your credit control system, but the finance provider offers you bad debt protection for the life of the contract.

Recourse Invoice Discounting – The finance provider manages your sales ledger without any credit protection. If an invoice remains unpaid by your customer, the finance provider reclaims the cash they previously advanced your business and you take on the credit control function to recover the funds from your customer.

Disclosed Invoice Discounting: Your customers are contacted of the finance lender’s involvement, making the proposition less risky for the lenders than if you choose confidential ID.

Compare Invoice Finance Offers.. Free!

Regardless of which type of financing that works best for your business, it’s recommended that you get a few competitive offers when factoring. Factor Bid is a free online small business resource that matches your business with the top finance providers in your industry so you get to see the best financing deals available today!

Visit www.factorbid.com and choose the “Get Started” buttons to quickly and easily see how much working capital you can access within 24 hours from money tied up in your outstanding accounts receivables.

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