How to Choose the Right Invoice Financing Company? Know the Secrets

By Per Frennbro in Cashflow

As a small business owner, don’t you want to protect your working capital and avoid cash flow problems? You sure do, right? These days, banks offer sky-high overdraft rates that most businesses can’t afford. If you in addition look at the total cost of using a bank loan you usually end up with more interest to pay because you usually add more items you need to sort out in the company since you know it is difficult to get an approval of the loan. It means you will end up with a bigger loan that lasts for a year or more only because you want to strengthen your cashflow.

Another area you do not consider is that you also change both your credit scores and credit limits as a loan means another undertaking which change your financial situation.

Using invoice financing is completely invisible for creditors and banks. It is your own money you already have spent on producing the goods/service. Why then take a loan to borrow money for money that is yours already? To us this sounds a bit strange.
With invoice financing you get exactly what you need and when you need it. A loan is running on long terms and is not that easy to get rid of. Sometime you have to pay fees for finishing the loan in addition to more cost along the way.

If you are one of those businesses and looking for a better alternative, then give invoice finance a try. And when money is involved, choosing the right invoice financing company becomes extremely important. So how can you choose the right invoice financing company? Or what are the things that you should consider while choosing the right invoice financing company? Read on.


Experience matters! Choose an invoice financing company that is well-established. These companies have the experience as well as financial reserves that you need for your business. It is suggested that you work with a company that specializes in your type of business or your industry. Why so? Well, because, those companies will know how cash flows in your business. This is, of course, an added advantage.


An invoice financing company maysay that their factoring fees are the lowest in the company. Don’t just believe that. Instead, do your own research. There may be additional fees that can increase the cost to a great extent. Most of the times, these fees are hidden in the fine print of the agreement. Here are some points that you should look for:

  • Factoring fees (generally between 3% and 8%)
  • Processing fees
  • The invoice financing company cover between 70% and 90% of the invoice without VAT.
  • Reserve requirements
  • Application/set up fees

If you know these extra costs, it will be easier for you to decide which company to choose.

Be clear about your requirements

If you are going for invoice financing, first, you need to decide what kind of service you need. For example, do you want to factor all your outstanding invoices or do you need some of your invoices to factor? While evaluating invoice financing services, make sure to be clear about exactly what you need.

Value-added services

Apart from financing invoices, there are many companies that offer additional services. One such example is collection services for overdue factored invoices. What exactly is this? Well, most of your invoices are get paid by your customers on time. However, there may be some that do not get paid by the deadline. These outstanding collections can be handled by the invoice financing company. This is one type of value-added service. Some other examples of value-added services include –

  • Online account reporting
  • Customer service
  • Invoice management

Now that you know what to look for in an involve financing company, choose the one that best fits your business needs.

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