While some business owners believe this type of financing causes their clients to have a negative view of them, this can’t be further from the truth. In fact, many businesses use invoice financing with great success. Given the higher interest rates (15%-35% APR) compared to other types financing, these loans are great when your business is need of cash immediately and for a short period of time. Because credit is extended based on your accounts receivables, your client’s credit score is usually more important than yours. Invoice financing can be a good option when you need a financing but haven’t yet built up enough credit history to get approval from a traditional lender.
Who Should Use Invoice Financing:
Businesses that deal in B2B
Businesses that have a seasonal cycle
Any B2B Businesses who have well-known clients
Businesses with extended billing cycles including retail, manufacturing, clothing, etc.
Businesses with unusually large invoice amounts
Advantages of Invoice Financing:
Quick and easy approval
Fills cash flow shortages
Simple pricing model
Disadvantages of Invoice Financing:
Rates are higher than other financing types
Invoices are required for collateral
Must have B2B or B2G (government) business