How to Decide if You Should Use Factoring Instead of a Loan

by Craig Anthony

0 min read

Factoring is a method of raising immediate cash financing for a business by treating invoices as collateral and selling them. The accounts receivable are sold to factoring companies at a discount, which generates working capital within 24 hours. Factoring is different from a bank loan in the following ways:

  • It is not debt. The business is selling accounts receivable.

  • There is no funding cap. As long as there are receivables to sell, cash can be generated.

  • Approval takes days, not weeks or months.

  • Approval is based on the client’s credit strength, not the business owner’s.

*Businesses at any stage are eligible, whereas startups have a very difficult time receiving bank funding.

References & Resources

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