page-loader
866-598-4295

Bankers Factoring

an Employee-Owned Accounts Receivable Factoring Company

Employee-Owned A/R Factoring Company

Encrypted Application

Bankers Factoring

Home Invoice Factoring versus an A/R Based Line of Credit

Invoice Factoring versus an A/R Based Line of Credit

How is Accounts Factoring different than a Bank Line of Credit?

What is the difference between Invoice Factoring and Accounts Receivable (A/R) Credit Line?

Invoice Factoring vs A/R credit line Financing
Accounts Receivable Factoring Line of Credit

Table of contents

Invoice Factoring versus a Bank Line of Credit (LOC)?

A Bank A/R Credit Line is Balance Sheet Driven. An A/R Factoring Company Buys Your Accounts Receivable.

One of the main differences between invoice factoring (also known as A/R factoring) versus bank accounts receivable financing is that a line of credit (LOC) from a bank or asset-based lender is balance sheet driven. If you do not have a current and reliable balance sheet or your balance sheet is weak, a credit line based on your accounts receivable is unavailable to you and your business.

Many times banks and Bankers Factoring work together to get their mutual client funded as receivable loans based on your outstanding invoices are some of the hardest to qualify for at a bank. AR factoring is easier to qualify for from an AR factoring company like Bankers Factoring. Remember, accounts receivable financing from Bankers is an asset sale of your good invoices or A/R. An AR-based credit line is a safe line of credit financing arrangement.

Benefits of Factoring and Financing

Both factoring and financing offer several benefits to businesses, including:

  • Improved Cash Flow: By converting outstanding invoices into immediate cash, businesses can enhance their cash flow and reduce the risk of bad debt.
  • Increased Working Capital: Factoring and financing provide businesses with the working capital needed to invest in growth opportunities, pay off debts, and cover operational costs.
  • Reduced Risk: Selling invoices to a factoring company can help businesses mitigate the risk of bad debt and improve their credit score.
  • Flexibility: Both factoring and financing can be tailored to meet the specific needs of each business, offering flexibility and adaptability.

Common Industries that Use Factoring and Financing

Factoring and financing are commonly used in industries that have a high volume of outstanding invoices, such as:

  • Construction: Construction companies often use factoring and financing to cover the costs of materials and labor.
  • Manufacturing: Manufacturers utilize these financial solutions to manage the costs of production and inventory.
  • Transportation: Transportation companies rely on factoring and financing to handle expenses like fuel, maintenance, and other operational costs.
  • Healthcare: Healthcare providers use these methods to cover the costs of medical supplies, equipment, and staffing.

Best Practices for Implementing Factoring and Financing

To get the most out of factoring and financing, businesses should follow these best practices:

  • Choose a Reputable Factoring Company: Research and select a factoring company with a solid reputation, competitive rates, and flexible terms.
  • Understand the Fees: Be aware of the fees associated with factoring and financing, including interest rates, origination fees, and other charges.
  • Monitor Cash Flow: Regularly monitor your cash flow to ensure that factoring and financing are meeting your business’s needs.
  • Communicate with Customers: Keep your customers informed about the factoring and financing process to ensure timely payments and smooth transactions.

By following these best practices, businesses can effectively leverage factoring and financing to improve their cash flow and support their growth objectives.

Accounts Receivable Factoring is a faster process than a Bank Credit Line

Speed is another reason to choose non-recourse invoice factoring. Factoring can take 2-5 days from application to first funding. Meanwhile, a bank line of credit could take months and still not close.

Unpaid invoices can be leveraged to generate working capital quickly through invoice factoring, converting them into immediate liquidity.

If you have a personal credit score below 650 or poor business credit, most banks can’t help you either. Another reason a bank or asset-based lender declines your line of credit request is your Tax returns. The last two years of your returns need to show enough cash flow and collateral coverage to cover your loan or credit facility. You might get a line of credit (LOC), but it might be much smaller than the non-recourse factoring facility you receive from Bankers Factoring and at a high interest rate.

When does invoice factoring work better than accounts receivable (A/R) financing?

In many business situations, a bank line of credit or A/R Financing is not available or will not work to solve your cash flow problems. A more aggressive source of working capital financing is needed, like Invoice Factoring. You are visiting Bankers Factoring today to review our funding options.

The following challenges are difficult for a bank to overcome but are typical factoring situations for a small business finance company like Bankers Factoring and its clients. Why are credit line business loans rejected at banks versus accounts receivable financing companies? This is where the comparison of financing vs factoring becomes crucial, as understanding the key differences between these options can help business owners make informed decisions.

Here are just some of the reasons business loans are declined.

Invoice Factoring (Yes) vs Accounts Receivable Bank Financing (No)

  • The bank loan facility declined
  • Balance Sheet weak
  • Bankruptcy (DIP Financing)
  • Extended selling terms of 90 days for customers to pay
  • High debt or inadequate company net worth
  • High or single-customer concentration
  • Highly leveraged
  • Hyper-growth
  • Need A/R financing to buy a company
  • Inadequate advance rate
  • Inadequate existing revolving loan facility
  • Large prior customer write-offs
  • Largest order in the company’s history
  • Leveraged or management buyouts
  • Need accounts receivable help
  • Newly formed or early-stage start-up
  • No vendor support or terms
  • Non-compliance with required loan covenants
  • Owners with a limited net worth or bruised personal credit
  • Payroll tax issues or tax liens
  • Poor or non-existent credit history
  • Potential acquisition
  • Private equity-backed companies
  • Seasonality
  • Selective Accounts Receivable Financing is available
  • Too small or too big for your current factoring line or company
  • Turnaround or restructure
  • Unhappy with existing invoice factoring services or asset-based lending relationship

Read a guide to acquiring a business LOC with bad credit. Even start-ups with bruised personal credit can get an A/R line of credit.

Invoice Factoring can be more expensive on the surface. Still, it can be much safer (from a non-recourse factoring company), and the amount of working capital can be much greater than what accounts receivable financing from a bank will offer via a small business line.

Net of costs, you end up with higher and safer profits by selling your invoices to a Non-Recourse Invoice Factoring Company like Bankers Factoring versus borrowing money from a traditional business funding lender via accounts receivable funding. Bankers factoring even has programs for non-b2b businesses. Turn your accounts receivables into working capital today.

Chris & Michael helped us get started and grow our business to where it is today.

James C, Directional Boring Factoring Client

Why Bankers Factoring | Trade Financing & Purchase Order Funding | Recourse vs Non-Recourse Invoice Factoring

Ready for the owner-employees of Bankers Factoring to fund your entrepreneurial dreams by buying your A/R? Call 866-598-4295 or go to Bankers-Factoring-Application.

(866) 598-4295

Get Fast Working Capital through Invoice Factoring

  • This field is for validation purposes and should be left unchanged.

Categories