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Allows you to work with bigger clients – Large companies often require longer terms to pay what they owe you.

This solves many problems for small business, which are often strapped for cash while they wait for to be paid.

Gets you fast cash – Invoice financing allows you to get paid by the lender for the amount of the invoice the next day and pay back the amount of the cash advance over time, rather than waiting for the credit card company to pay out.

Here are four ways that invoice financing can grow your small business: Both services charge a fee of around 3%, it just depends on who you want to be in charge of collection. However, there is no guarantee of collection-you have to trust that the factoring company will successfully collect unpaid invoices from customers on your behalf. With invoice factoring, the factoring company is responsible for collecting invoice payments. With invoice financing, you maintain the responsibility for collecting the amount of unpaid invoices.

Invoice factoring is not a loan, but a purchase of your accounts receivables. With invoice factoring, you sell invoices for immediate cash. With invoice financing, you put your invoices up as collateral for a line of credit. Invoice financing and factoring perform similar functions, with a few distinctions. You are then responsible for collecting the invoice from the customer and repaying the lender later.

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You can wait to realize the full value of that invoice when it gets paid in 30, 60, or 90 days, or you can sell unpaid invoices to financing companies.Įssentially, your businesses uses an invoice as collateral in exchange for receiving a cash advance for the amount of the invoice. Even though you haven’t been paid on it yet, it still has value. So how does it work? Your invoice is an accounts receivable.

Invoice financing is a way for business to borrow money from a lender based on amounts due from customers.

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Read our complete guide on How to Write an Invoice and the best practices for getting paid faster What is invoice financing? After learning how much extra cash this method of payment could mean for your small business, you’ll want to ditch credit cards forever. If you’ve never heard of it, keep reading. This means that while paying by credit card may be convenient for your customers, it likely isn’t as convenient for your business, which winds up paying service fees as high as 3% in order to receive your money quickly.īut what if I told you there was a better way to get paid – and with lower fees to boot? One of the challenges of running a small business is that every dollar counts.