3 Reasons Invoice Financing is better than a Bank Loan

Loan vs Invoice Factoring

Tough financial policies imposed by banks mean that getting bank loans is increasingly becoming difficult. Not only will you be required to follow a highly procedural method but you will also have to prove your eligibility to get a bank loan. Such conditions mean that bank loans cannot be reliable for urgent financing that businesses may face in the course of their daily operations. It is no wonder that invoice financing among other alternatives are increasingly becoming common among small business owners. This article aims to clarify on what invoice financing is and discuss the three main benefits that make it attractive to most borrowers.

What is invoice financing?

Invoice financing simply involves borrowing funds against the value of unpaid business invoices. For this reason it is also known as invoice discounting.The business owner gives the unpaid invoice to the invoice financing company in exchange of funds equating to its value. You are then required by the invoice financing company to follow up the invoices’ payment and settle the debt with the company when the invoice payment is made.

Why is the invoice financing option better than a bank loan option?

Invoice financing is flexible

Unlike normal bank loans, invoice financing options are not limited by the strict regulations that limit people’s chances to getting a loan. With invoice financing, companies bending their operational policies to ensure that they meet the specific needs of their customers. The basic principle is that the amount of loan borrowed and the payment duration is totally determined by your invoice. This means that the borrower does not have to involve in any pressurized repayment process. The loan is simply repaid as soon as the invoice is paid. This sort of tailor-made option with invoice financing loans allows business owners to borrow within their limit. The loan, therefore, offers you an opportunity to grow together with your business.

Invoice financing is cost effective

Compared to bank loans, invoice financing option is a very cheap method to borrow money. You stand a chance of getting up to 95% of the face value of the invoice issued. This implies that you only have to be charged 5% for what you borrow. Bank loans have higher interest rates which spread over a lengthy period. In addition to the lower interest rates, invoice financing allows the borrower to get the money within 24 hours after filling an application. Bank loans are not attainable within a day of application. Such high level of cost effectiveness means that invoice financing options offer borrowers a more reliable and cheaper option for urgent money.

Invoice financing does not require any security

With invoice financing options, you only have to present the invoice financing company with your invoice and prove its credibility by offering the supportive documents. On the other hand, it is impossible to go to a bank loan and request for a loan without offering a security. The issue of security curtails most people from accessing loans because unless you have a deed for a house or a log book, you cannot get a loan regardless of your ability to pay it back. Invoice financing options eliminate this hindrance to their borrowers.

For more information on Invoice Financing we suggest you visit www.invoicefunders.co.nz/what_is_invoice_finance