Are you a business owner who is often dealing with lots of outstanding accounts receivables? Frustrating, isn’t it? You are not alone. The problem is that when there are lots of late payments, you can be short on cash. Then you’ll have problems paying your employees, paying your utilities, and even ordering stocks for your business.
Naturally, you want to find the best solution to this problem. Among those solutions are invoice factoring or financing, also known as accounts receivable financing. Perhaps you are wondering if they are the same, and if not, what the difference is between the two.
In this post, Porter Capital, your trusted invoice factoring company, will discuss the differences between the two, so you can better decide which approach is right for your business:
The Main Difference
The biggest difference between invoice factoring and invoice financing is who does the collection for the unpaid invoices. For the latter, the customer gets complete control of collections, while for invoice factoring, it’s the factoring company that purchases the unpaid invoices and therefore takes over all the collections.
What Is Invoice Financing?
Invoice financing or invoice discounting, as some call it, is borrowing money against outstanding accounts receivable. A lender will give you a part of the unpaid invoices (sometimes up to 90%) upfront through a loan or line of credit. Then once the client pays the invoice, you’ll have to p