How Does Invoice Factoring Differ From A Bank Loan?

By Author: David Andrews
Total Articles: 197
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For many companies facing difficulties in the current economic climate, a bank loan can seem like the only option available to inject much needed capital into a business, particularly if you run a Small or Medium Sized Enterprise (SME). Unfortunately, this can come with numerous drawbacks. Many banks now operate tighter lending restrictions and high interest rates. A sizeable bank loan on your balance sheets could also make your business less attractive to potential investors.

In many circumstances invoice factoring could actually be a far more effective solution to cash-flow problems for SMEs. Although factoring provides an instant cash injection for your company, it doesn’t work in the same way as a loan and won’t appear as a liability on your balance sheet. Instead, factoring takes into account the natural ebb and flow of your capital due to the often lengthy process of invoicing clients, allowing you to simplify your finances and manage your daily expenses without slipping into the red.

How Does Factoring Work?

Invoice Factoring works by allowing companies to sell their invoices for instant cash. ...
... The factoring company will provide you with instant capital, in some cases up to as much as 90% of the value of your outstanding invoices. They will then chase up the client payments on your behalf, leaving you with the funds you need, when you need them, and time to focus on other important areas of running and developing your business.

What are the benefits of Invoice Factoring compared to a bank loan?

- No negative effect on your credit rating.

- Instant capital when you need it

- Simplifies your finances, freeing up your time and allowing you to focus on other aspects of developing your business

- Your Invoice Factoring Company should be able to release more funds to you to reflect the growth of your business without the necessity of renegotiating a new contract.

Make sure you seek out a reputable, fully accredited invoice factoring company who will be able to offer you the best deal to reflect your business model. By ensuring that you always have access to the capital you need, you should be well placed to see your business thrive in the future.

Hitachi Capital is a reputable and leading provider of invoice finance solutions. Invoice factoring allows you to release cash for your business utilising invoices as collateral. For businesses wishes to work with Hitachi Capital we provide a simple process and a range of incentives.

Hitachi Capital is a reputable and leading provider of invoice finance solutions. invoice factoring allows you to release cash for your business utilising invoices as collateral. For businesses wishes to work with Hitachi Capital we provide a simple process and a range of incentives.