Against factoring
The functional differences are ownership, confidentiality, and who chases payment. Financing keeps all three with you. That suits businesses whose customer relationships are delicate or whose collections function already works well.
It is generally harder to qualify for than factoring, because the financier is relying on you to collect rather than doing it themselves.
Commonly used for
- Businesses with strong internal collections
- Situations where customers must not know about the financing
- Ongoing receivables funding rather than one-off invoices
What to check before signing
- You retain the risk if a customer does not pay
- Facilities are typically tied to a borrowing base that is recalculated and can shrink
- Concentration limits cap how much of one customer's invoices count
Invoice financing: common questions
- What is the difference between invoice financing and factoring?
- Factoring sells the invoice; financing borrows against it. With factoring the factor collects and your customer knows. With financing you collect and your customer does not.