Why Invoice Factoring is Better than Bank Loans for Small Businesses
When small businesses need additional funding, small business owners usually consider either bank loans or alternative financing, such as invoice factoring. Given that many small businesses have a hard time obtaining bank loans, invoice factoring becomes a much more appealing option.
Here are a few reasons why many small business owners prefer invoice factoring to bank loans:
With invoice factoring, a factoring company purchases your outstanding invoices and provides you upfront advance payment on those invoices within days. In contrast, bank loans have a lengthy approval process, typically 30-60 days. Many small businesses fail because of insufficient working capital; invoice factoring can solve this problem through quicker cash turnaround than would be provided by banks.
There are less hurdles in qualifying for invoice factoring than for traditional financing because your credit history does not matter. Factoring companies are more concerned with the creditworthiness of your customer. This is what makes invoice factoring an attractive option for small business owners: it alleviates their concerns of not being able to obtain funding due to their personal credit history. In addition, far fewer documents will be required for invoice factoring than for bank loans.
On the other hand, banks take time assessing your credit history and even after undergoing this rigorous approval process, there is still a chance that you may not be approved for the loan.
No Additional Debt
As we mentioned before, when you factor your invoices, you will receive immediate advance payment of money that is owed to you. This is advantageous for small business owners because you avoid incurring additional debt and have cash readily available.
Speed, ease, flexibility, and control are among some of the benefits that invoice factoring provides over bank loans. At Accel Business Funding, we provide invoice factoring services and have worked with many small businesses.
If interested, please contact:
Chris Han, Accel Business Funding
Tel – 818-963-8882