Today we tackle one of the most common questions about Factoring: What is the difference between Invoice Factoring and invoice financing? While these terms may sound similar, they are vastly different. Keep reading to discover why.
What Is Invoice Factoring?
Invoice Factoring is a way for businesses of all sizes to get a fast infusion of cash.
More often than not, businesses have to wait 30 to 90 days for their clients to pay you. Fortunately, Factoring eliminates this waiting time.
How? Easy: when businesses have unpaid invoices lying around, they can turn them quickly into cash by Factoring them.
When you Factor your unpaid invoices, you are essentially selling them to a company called Factor. The Factor pays you upfront (minus a small fee) and then proceeds to collect the invoices from your clients.
It’s a simple, fast, and convenient process that allows businesses to get the cash they need without waiting up to 90 days and without having to worry about debt.
Invoice Factoring vs. Invoice Financing: What Is the Difference?
Unlike Invoice Factoring, with invoice financing you use your unpaid invoices as collateral to get cash, but you are still responsible for collecting the payment from your clients and for paying back the invoice financing company.
Think of it this way: While Factoring means selling your invoices, invoice financing is more like taking a loan against your outstanding accounts receivable.
In short, Invoice Factoring and invoice financing are two completely different financing solutions. However, Invoice Factoring is often the preferred alternative because it tends to cost less than invoice financing.
Invoice Factoring offers the added advantage of taking off your shoulders the burden of the collection process. And if you work with a non-recourse Factoring company like ACS Factors, you also limit the risk of bad debt because the Factor assumes responsibility for any unpaid invoices. A win-win situation!
ACS Factors: We Turn Your Invoices Into Immediate Cash
At ACS Factors, we help you get the capital you need to move your freight business forward. 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.
Reach out today by email (firstname.lastname@example.org) telephone (909-946-5599), or through our social media accounts on Facebook, Twitter, and YouTube, and start converting your accounts receivable into cash today!