With the wide range of potential financing options available today, it can be difficult to know which is best for your business. Which option will serve all my needs? Which can I be approved for? Luckily, you do not have to make your decision alone.
Here, we will look at the specifics of invoice discounting and invoice factoring, comparing the two and describing some of the benefits or potential drawbacks of each. By the time you finish this blog, you will be well informed and well on your way to making the best decision for your business. Let’s get started.
Invoice Discounting
Invoice discounting allows business owners to better control the value of their unfinished sales. In invoice discounting, when an invoice is sent to your customer, a proportion of the total amount becomes available from the lender, providing a valuable source of working capital throughout the month.
While very similar to factoring, your customer may not be aware that you have taken on cash flow finance when you use the power of invoice discounting. You remain in control of your sales ledger, collecting payments as normal, and sending out reminders.
This system allows you to maintain your own style of communication and standards of customer service. In many cases, those factors are key to the success of your company.
Factoring
Like invoice discounting, factoring also allows you to turn your sales ledger into working capital. However, as stated previously, when you decide to pursue a factoring option, your customers will be aware you are using this method. The factoring company will be the one communicating with them, sending reminders for payment.
There are also significant benefits to factoring. Non-recourse factoring with Advanced Commercial Capital protects you from accruing debt. If your customers do not pay their invoices, you are not held responsible, and the factoring company takes on the risk involved.
Additionally, your ability to be approved for invoice discounting is dependent upon your own reliability and credit, whereas factoring companies such as Advanced Commercial Capital make their decisions based on the reliability and credit of your clients.
Which One Best Suits Your Needs?
Even with the differences laid out, it can still be difficult to know which is best for you. However, invoice discounting may be a promising option if:
• Your credit control procedures are proven to be effective
• You have minimal to no debt
• Your customers generally pay on time
• You meet the minimum level of turnover required by the lender
Conversely, if you do not carry out credit management processes in-house, invoice factoring is likely the better option.
Work with Advanced Commercial Capital
Advanced Commercial Capital is in the business of helping your business grow through fair and honest invoice factoring. If, after reading this blog, you would like to have a more in-depth discussion about your financial needs, including whether invoice factoring may be right for you, call our office at 855.465.4655 or fill out our online contact form today.