Traditional Business Loan Vs Invoice Factoring

Traditional Business Loan Vs Invoice Factoring

All businessmen do not have enough cash or huge bank balances. Many of them raise loans to keep their trade activities running without any hurdles. Candidly, funds are the backbone of any business. Traders have to procure raw materials, pay the wages or transportation expenses and meet other such expenses. Large section of the traders depends upon advances facilitated by banks or other financial institutions. Different options including business loans, merchant cash advances or invoice factoring is available for fulfilling the business needs. Prominent concerns including Maryland invoice factoring companies provide loans against easy terms. Candidly, factoring has become the preferred choice of millions of traders across the globe. They fulfill their cash requirements through this method.

Those thinking to avail cash through traditional business loan or invoice factoring must know their following key differences –

  • Simplicity To be frank, factoring companies do not impose any hard and fast rules for allowing loans to the businessmen against their unrealized invoices. However, banks and other traditional lenders ask for huge paper work and other formalities. Candidly, factoring advance is not any loan and it is now shown on the balance sheet as a debt. This preferred non-loan alternative to a commercial loan is the great way for raising instant cash.

Traditional Business Loan Vs Invoice Factoring

  • Seasonality and profitability These two extraordinary characteristics of invoice factoring are the additional benefits for the traders that raise loans from financiers.
  • Program features Companies raising loans factoring are at great benefit. Advances up to 98% of the invoice value, unlimited A/R funding, free credit checks and A/R Management are the additional features that are not seen in   traditional loans.
  • Approval process No approval process is needed as regards loans through Maryland invoice factoring companies or other such concerns. They do not ask for tax records, lengthy paperwork or other such documentation that is a tedious process. As such millions of businessmen prefer this type of advance against their pending invoices.
  • Fast cash Invoice factoring companies provide ready cash on instant basis just by verifying the invoices that are realized after few days. The businessmen that ask for such advance are at great benefit as they do not have to produce different documents for approval of loan through banks or other financial institutions.
  • Nominal fee Invoice factoring companies charge very less fee against the cash that they facilitate to the needy guys. However, the interest and other charges asked by traditional money lenders and other financial institutions are too heavy and put financial burden upon the borrower’s.
  • Flexibility Finance through invoice factoring companies is quite flexible and the short-term funding option that is not highlighted in the account books of the borrowers. It does not put any adverse effect upon the creditworthiness.

Borrowers! Do weigh the above aspects before raising loans from traditional lenders or the invoicing factoring companies.

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