Invoice Factoring Edges Out Competition Among Short-Term Borrowing Options

No new debt, unlimited financing and help collecting on unpaid invoices gives invoice factoring the edge

Interstate Capital Invoice Factoring Edges Out Competition

​When a business needs to raise capital, the more short-term the borrowing options, the better. For every option, though, business owners must weigh the increased cash flow against the trade-off. Interstate Capital looked at a breakdown of options – from bank loans to savings – invoice factoring comes out on top.

1 - Bank or credit union loan

If a business already has a good relationship with a bank or credit union – or wants to build one – they may consider a loan for short-term financing. Of course, approval takes time, so it may not be a viable option.

When a business needs to raise capital, the more short-term the borrowing options, the better. For every option, though, business owners must weigh the increased cash flow against the trade-off. Interstate Capital looked at a breakdown of options - from bank loans to savings - invoice factoring comes out on top.

Using a bank or credit union loan means:

●      Typically lower rates than a credit card

●      Building a relationship with a lender

●      Longer approval process

●      Approval dependent on credit

●      Taking on new debt

2 - Credit card

Of all the short-term financing options, a credit card might feel like the easiest go-to route. What business owners must avoid, however, is confusing familiarity with practicality.

Using a credit card means:

●      Quick and easy online application and approval

●      Immediate access to funds

●      Personal credit or personal guarantee (for business credit card)

●      Interest rates typically higher than a loan

●      Taking on new debt

3 - Line of credit

Though it serves a similar purpose to a credit card, a line of credit generally comes with higher limits and lower rates. That said, rates are usually adjustable and it’s easy to overspend.

Using a line of credit means:

●      Typically higher limits and lower rates than a credit card

●      Adjustable interest rates

●      Relying on credit for an unsecured loan

●      Relying on collateral for a secured loan

●      Taking on new debt

●      Potential for overspending

4 - Peer-to-peer loan

Loans through peer-to-peer lending sites usually offer lower rates than traditional loans. But business owners will likely have to rely on personal credit history, and their experience may be limited to their interaction with the lending platform.

Using a peer-to-peer loan means:

●      Lower rate than a traditional loan

●      Quick and easy online application and approval

●      Relying on personal credit for approval

●      Taking on new debt

●      No way of building a relationship with peer lender

5 - Friends and family loan

If there’s anyone a business owner can count on to help out in a pinch, it’s friends and family. The question is, how will borrowing money from them affect the relationship?

Using a loan from friends or family means:

●      No approval process

●      Immediate access to funds

●      Potential damage to the relationship

6 - Savings

It’s there for a reason but is this the right reason, especially with so many other short-term financing options. Business owners work hard to build up savings and replacing it will not be easy.

Using savings for short-term financing means:

●      No new debt

●      Immediate access to funds

●      Depletion of savings

7 - Invoice factoring

If a business owner has unpaid invoices, they may already have all the financing they need. They just don’t have it yet. Invoice factoring bridges the gap.

Using invoice factoring means:

●      No new debt

●      No limit on how much can be financed

●      Approval dependent on customers’ credit, not the business owner’s credit

●      Decision within 1 or 2 business days

●      Upon approval, immediate access to funds

●      Advance of up to 90 percent

●      Building a relationship that can help for future financing

●      Help collecting on invoices

●      “Repurchasing” invoices not paid by customers within 90 days (unless non-recourse applies)

●      Factoring fees

Though there is something to appreciate about each of these short-term financing options, invoice factoring just edges out the competition. Yes, it comes with fees, but it’s hard to beat the benefit of having no limit on how much a business owner can finance - with their own money.

Press Contact:

Interstate Capital
Phone: 800-422-0766

 

Source: Interstate Capital


Categories: Finance, Business Finance

Tags: factoring companies, factoring specialists, invoice factoring, Payment terms


About Interstate Capital

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Interstate Capital, one of North America's leading invoice factoring companies, focuses on one goal: helping small and medium-sized businesses succeed and grow.

Cindy Graff Cohen
Interstate Capital
Interstate Capital
1255 Country Club Road
Santa Teresa, NM 88008
United States