Invoice Factoring Vs. Business Loans: A Comparison

By Per Frennbro in Fast Financing

Are you a small business owner? When it comes to financing your business, you may think of options such as investment capital and bank loans. Do you know what the problem is with these two traditional methods of financing? These are not within the reach of most business owners, especially small and medium-sized companies. This is one of the main reasons why start-ups, as well as small and medium businesses, fail to grow.

There are many small companies that fail as a business not because they are not able to secure initial financing but because they cannot pay the bills. Shortages in cash flow work as a villain to small and medium-sized businesses as they restrict their ability to meet operational expenses of day-to-day and damage their business credit.

In order to get rid of their cash flow problems, many businesses end up taking on excessive and unnecessary debts. Taking personal loans and making use of credit cards are the two popular but ineffective ways. Similarly popular are business loans. However, the problem with this type of loan is that it is almost impossible to obtain if you have already taken loans before because of cash flow shortages. Are you facing the same situation? Then you can get help through invoice financing. This can be regarded as one of the most accessible as well as efficient methods of financing. This can let you keep your cash flow intact. So, what is the difference between invoice factoring and business loans?

Business loan:

  • In order to get started with your business, you take on debt when you had to incur some sort of financing. At the same time, the loan generates a bad credit score but also affects the credit limits and many other scores. In most cases, what happens is that you get a loan for a long-term, you load your credit limits but get a bad credit score. You also usually take on more debt than what is necessary since it takes quite some time to get loans and get approved.
  • Business loans are issued by commercial banks which are difficult to convince. They usually reject the loans due to the small size or a loan without collaterals. Generally, banks are interested in providing loans to business operations that have a high credit rating along with a strong ability to repay them.
  • If you are getting a business loan, know that it involves a contract between the two parties: the business owner and the bank. Usually, it also means that you as an owner will be liable to pay if the company cannot pay.

Invoice factoring

  • Through BETALD we do not need any credit score on your company. We check if it is “clear” and if it is then it takes less than an hour to settle invoice auction and get the cash.
  • With invoice financing, you get your own money returned fast and easy. There is no collateral through BETALD needed more that order in your bookkeeping
  • With BETALD invoice financing you will not be liable to pay back the money as it is your customer that will be the payee.
  • You do not take excessive loans and you get to pay the cost per the period you use it and not over a whole year or longer than the lenders do. In total, you also pay for that invoice only and not for all invoice.

In conclusion, it can be said that compared to business loans, invoice factoring has a lot of advantages. And the most important of them all is that the entire process of factoring is seamless. If you are on the verge of deciding which one is better among these two, we would definitely suggest you go for invoice factoring.

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