Invoice Factoring vs. Other Financing Options: Which is Right for You?

Photo by Sarah Elizabeth on Unsplash

When it comes to growing your business, choosing the right financing option is crucial. With so many options available, it can be difficult to determine which one is right for your business.

Let’s take a closer look at invoice factoring and other financing options, so you can make an informed decision.

What is Invoice Factoring?

Invoice factoring is a type of financing that allows businesses to receive a cash advance on their outstanding invoices. When you choose invoice factoring, you sell your invoices to a factoring company, which advances you a portion of the invoice amount, typically around 85%.

The factoring company then collects payment from your customer and passes the remaining balance on to you, minus a fee for their services.

What is Invoice Financing?

Invoice financing, on the other hand, is a financing option where you maintain control over your accounts receivable.

Instead of selling your invoices, you receive a loan based on the value of your outstanding invoices. The loan is then repaid as your customers make payments on their invoices. With invoice financing, your customers continue to pay you directly, rather than the…