Invoice Factoring vs Line of Credit

Invoice Factoring vs Line of Credit

When it comes to business finance – what works best for you? Here, we discuss the differences between Invoice Factoring vs Line of Credit

Growing businesses can experience cash flow hurdles from time to time, irrespective of size. Unforeseen events, such as the pandemic or problems in the supply chain can create problems such as reduced or delayed accounts receivables, downturn in trade or an unforeseen increase in operating expenses and costs. 

While there are a number of options available for cash flow management, we will explore the differences between invoice factoring and a business line of credit.

Line of Credit

Similar to a credit card, a financier will offer your business a Line of Credit facility that provides you with access to funding or financing on demand.

As you draw down funds from this line of credit, it reduces your available credit. Again, much like a business credit card, you are then given extended payment terms to pay down the facility, in turn, restoring and increasing your available credit.

Invoice Factoring

Invoice factoring is the advanced payment of outstanding funds that are owed to you by your customers. With invoice factoring (also known as Invoice finance), a business can advance up to 80% of the value of an outstanding invoice, with the final 20% (minus fees) paid to you once your client has paid the invoice.

The benefit to Invoice factoring is that the debt obligation isn’t extended over a long period of time, the credit terms are more flexible and the approval process is typically faster

So – when it comes to Invoice Factoring vs Line of Credit, who wins?

Both finance solutions have great upsides and some downsides that need to be taken into consideration when choosing the most appropriate financing solution for your business.

Businesses aren’t cut from the same cloth, and neither are their working capital and financial positions. That’s why here at Fifo Capital, we create a bespoke solution for you that fits your business requirements. When you partner with Fifo Capital, you have the assurance that we’re by your side.

Complete the form below for a no-obligation, finance discovery call with our business Finance Specialists today.

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