Real Ways Invoice Financing Works for Small Business

For small businesses, securing and maintaining adequate capital can be a struggle. Invoice financing is one of the ways to overcome this constant need for capital. It’s a relatively simple and quick way for small businesses to finance their invoices either by selling them to a factoring company or using receivables to get a line of credit. Here’s the scoop on how invoice financing is offering real solutions to small business financing.

Invoice Factoring

When companies opt for invoice factoring as an invoice financing option, they sell their accounts receivable to get access to working capital. A factoring company pays for the invoices and gives the business funds immediately so it can cover its operating costs. Having invoices from creditworthy clients is the primary qualification for this type of lending.

Benefits of Invoice Factoring

For small businesses, invoice financing through factoring is beneficial because neither substantial assets nor a long credit history are necessary. It’s far simpler and faster than trying to secure a traditional loan.

Asset Based Loans

Another form of invoice financing small businesses can use is financing company assets, including inventory, invoices, and machinery. This type of invoice financing allows companies to use their accounts receivables to obtain capital by combining features of a term loan or a line of credit.

Benefits of Receivables-Backed Asset Loans

Companies that choose this type of invoice financing benefits by securing working capital that works similarly to a conventional line of credit. Funds can be drawn as clients are invoiced and the line paid down as customers pay. Typically, a business can borrow as much as 80 percent of eligible receivables.

Both invoice factoring and asset based loans can be viable options for small businesses. Which one you choose depends mostly on your company, your needs, and the financial strength. It’s worth checking out because regardless of the size of your company or its sales history, invoice financing is a relatively simple way to get the funds you need quickly.

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