Home Social Good Which Is Better for A Loan,Business,Invoice Factoring or Invoice Financing?

Which Is Better for A Loan,Business,Invoice Factoring or Invoice Financing?

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Which Is Better for A Loan,Business,Invoice Factoring or Invoice Financing?

Business Loans

If you decide to go for a business loan, then it is imperative for you to have been in business for at least two years. For credit assessment, you need to have a long credit history as well. Another condition of the bank is that you will need to have satisfactory personal assets.

Are you in need of funding for your business?  You have three choices in this regard. You can opt for a loan, invoice factoring or invoice financing. We will compare these three options to help you figure out what the best option is for you.

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If you want to get a loan from a bank, you might have to undergo an extensive application processing procedure. And there are times, of course, that despite trying hard, loan applications still do not get approved.

Secondly, bank interest rates for business loans are quite high.  Banks set their own risk profile. If the application does not meet their risk profile, then the bank will reject the application.


Invoice Financing

A better approach to receive the necessary funding might be invoice finance.  Invoice finance means that you borrow money against the funds that are due from your customers. The benefit of invoice financing is that it will help improve your cash flow. It also helps businesses to pay their suppliers and employees without the need to wait for the customers to pay their balances in full.

What businesses do in the case of invoice financing is to pay a percentage of the real invoice amount to the creditor as a defined fee.

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There are times when customers take a long time to pay their bill off, and invoice finance can be a useful solution in this situation. Invoice financing benefits the lender as well because the invoices play the role of collateral for invoice finance.

Businesses also benefit from invoice finance because the business can get access to the funds as soon as the invoice is posted.

Invoice Factoring

When you are in need of funds for your business, then another term that you might come across is invoice factoring. The concept of invoice factoring is similar to that of invoice finance. It means that you will be able to receive 85% of the invoice upfront.

In the case of invoice factoring, the amounts of the invoices are advanced in the order in which they are received. For invoice financing, you pay a monthly fee. However, for invoice factoring, you will have to pay about 15% of the invoice amounts.

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For invoice financing, you will still have to deal directly with the customers to obtain their payments. In the case of invoice factoring, the company will have a debt collection service. It retrieves the payments from the customer on behalf of the business.

Before deciding to seek the best source of funding for your business, always consult a financial advisor.

So, what do you think about this? Simply share all your views and thoughts in the comment section below. For the latest tech,social media news and reviews, follow firebebble.com on Twitter, Facebook and Instagram



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