Unpaid invoices can be an issue for any business. While you may be confident the cash from your accounts receivable will come at some point, long repayment terms and slow-paying clients could cause a major problem for your cash flow and your business.
Rather than wait weeks or months to receive the cash your customers owe you, you can get funding immediately via invoice financing or invoice factoring. Both options can work to benefit your cash flow gaps.
Invoice financing is better for companies that want to keep control over their invoices. If you have a good relationship with your clients and can get your outstanding invoices paid fast, then invoice financing can be a solid and affordable financing strategy.
On the other hand, invoice factoring is a better option for companies that don’t have an issue with giving up control of their accounts receivable and letting the factoring business receive payments from clients. It can be especially helpful for small companies that don’t have the bandwidth to follow up on invoices.
In addition, it is easier to qualify for factoring compared to financing for new companies and business owners who have bad credit since it focuses more on the credit profiles of your clients. That said, invoice factoring is likely to have more expensive fees.
