Large and small businesses can struggle with accessing working capital. Regardless of whether they are trying to keep up with inventory or customer delayed payments, managing cash flow is important to growing and obtaining a business. A business can take advantage of SBA loans, bank loans, invoice factoring, and small business loans as financing options.
What is invoice financing?
Invoice financing provides fast payments on a business’s outstanding invoices. The company receives immediate payment on their unpaid invoices, and the invoice financing company waits for the customer to pay the invoice at the end of the payment term, typically net 30-90.
This type of financing is for businesses that sell products or perform services on credit terms. Companies seeking a factoring line of credit benefit from receiving cash immediately, instead of waiting 30-60-90 days for payment from their customers. Unlike a bank loan, you are not incurring any debt; instead, there is a small factoring fee to selling your invoices and receiving the cash immediately.
When does invoice financing make sense for a business?
When a business needs financing fast
Getting business financing through an invoice financing partner is a lot quicker and smoother than a traditional loan. If you’ve spent some time in business, you know that some things cannot wait. Companies can be approved in as little as 24 hours and start financing their invoices immediately; there is no lengthy application process. Approval is not based on the business’s credit score, but the customers’ credit score.
When a business doesn’t want to put a cap on funding
Invoice financing does not limit how much a business can finance; it all comes down to its volume and needs.
When a business does not want to add any additional debt
A business incurs no new debt with invoice financing. Since there is nothing to pay back, the company avoids any interest rates. The only thing the business pays for is the small factoring fee pulled from the total invoice amount.
Additional types of financing options
Inventory Financing: An asset-backed, revolving line of credit or loan made to a company that serves as a cash injection to purchase more products where the inventory acts as collateral to the lender. Companies with valuable inventory that can be appraised qualify.
Equipment Term Loan: An asset-back loan repaid in regular payments over a set period, usually in 1 to 10 years. Companies or individuals that need a loan against real estate qualify. The Loan to Value will be between 30% and 50% of the appraised value.
Bridge Loan: A short-term loan repaid in a year that is secured by real estate. Companies with equity in equipment that can be appraised qualify.
Porter Capital is your strategic business partner.
If you’re in the finance industry and work with businesses that need alternative financing, think about Porter Capital. We complement your business with an additional revenue source through your referrals.
Think of Porter when your client when: