Bank loans are one of the oldest and most popular financing options for business owners. However, financing is a big landscape with many alternatives available. One of those options is Factoring, where you sell your accounts receivable to a company (called Factor) that pays you right away and collects the invoices from your clients in exchange for a nominal fee.
Many companies in different industries are using Factoring to successfully grow their business. But how does this financing option compare to bank loans?
Factoring Offers Faster Approval Times
One of the main drawbacks of bank loans is that the approval process is long and complicated. Banks are risk-averse, in other words, they prefer to always play it safe. As a consequence, if you want to take out a bank loan you need an impeccable credit history and documentation that proves a solid financial standing. All in all, it can take weeks for your credit to be approved.
By contrast, Factoring offers more flexible (and faster) approval terms. It makes sense because a Factor doesn’t get money directly from you but from your clients. And when it comes to speed, Factoring is almost impossible to beat. For example, with ACS Factors you get approved not in days or weeks, but in hours.
Factoring Doesn’t Create Debt
Another important downside of bank loans is that they add more debt to your balance sheet. Each loan has an effect on your credit rating that translates into higher interest rates on future loans. It’s also important to mention that late payments can hurt your credit as well.
Factoring allows you to ward off all these problems. When you Factor your receivables you don’t incur debt because you are not withdrawing money from an institution but selling something that belongs to you: your invoices.
Factoring Preserves Your Cash Flow
Bank loans are as clear cut as it gets: you get a determined amount of money, and you are expected to pay it back in equal monthly installments.
That sounds simple enough, but what happens when your business produces just enough revenue to cover the installments? That kind of situation will affect your cash flow and can threaten the continuity of your business.
Factoring has the opposite effect. This financing solution is so flexible that it grows with your business and adapts to your needs. Is your cash flow suffering because some clients are slow to pay? No problem: Factor those invoices and improve your cash situation almost instantly. Factoring is an ally, not a burden for your business.
In conclusion, if you have substantial revenue, a spotless credit history, and don’t mind waiting a few weeks, a bank loan may be the right alternative for you. If you are looking for a fast and flexible financing solution that doesn’t create debt, then Factoring is the way to go.
ACS Factors: Advancing the Capital You Need to Move Your Business Forward
At ACS Factors we are here to help you turn your invoices into immediate cash. We are located in Upland, California, and have many clients in the distribution and logistics corridor which includes Ontario, Riverside, Fontana, Jurupa Valley, and Moreno Valley.