What are the differences between Invoice Funding & a Bank Loan?
When business owners are faced with financing and funding challenges, many of them will turn to banks for help. And in some situations, bank loans make sense! However, invoice funding can also be an option to help with cash flow needs. That is why we pulled together some of the key differences between factoring and bank loans to help determine which option may make the most sense for your business.
- Form of Repayment – Repayment of bank loans includes the principle payment + interest. Invoice funding does not have interest.
- Credit History – You do not need good credit to qualify for a invoice funding program. Banks will analyze your credit history, assets & liabilities to qualify for a loan.
- Account setup – Loans or lines of credit can take up to 1-2 months to set up, while invoicing funding accounts can be set up in a few days.
- Paperwork – Invoice funding requires basic business information and paperwork compared to bank loans that require extensive documentation and financial records.
- Capital Limits – Banks limit the amount of money you can borrow. The amount you can finance through invoice funding is not capped and can grow with your company and receivables.
- Rates – Bank loan interest rates are locked, while invoice funding rates can be adjusted as you factor larger amounts.
- Account receivable management – Invoice funding provides professional accounts receivable management. Bank do not assist with accounts receivables.