When business owners are in a cash crunch, they find ways to fund their business operations. Fortunately, invoice financing, such as is offered at Nassau County invoice financing, let business owners sell outstanding invoices to third-party companies at a discount in exchange for immediate funding.
Here are five different types of invoice financing for your business:
1. Invoice Factoring
Most people often use invoice factoring and invoice financing interchangeably, but both are different from one another. Other than selling your invoices and receiving immediate cash, invoice factoring companies are also in charge of collecting payments from your customers. While this may mean less work on your part, this can also affect your relationship with your customers. For many business owners, client relationships are very important, so they’re a bit wary about factoring companies handling business transactions.
2. Invoice Discounting
Unlike factoring, with invoice discounting (also known as ‘confidential invoice financing’) your customers don’t have to know you’re tapping into invoice financing. They are similar in the sense that they’re both short-term financing options and business owners borrow money against outstanding invoices. However, in invoice discounting, business owners remain in control over their sales ledger, payment collections, and invoice processing.
This is a better option for businesses who prefer to transact with customers personally, without the help of a third party. Invoice discounting is a better option for large and well-established businesses with a solid customer base.
3. Spot Factoring
As the name suggests, spot factoring is a type of invoice financing where business owners can sell a single invoice, instead of the entire debt collection. Some clients only use spot factoring as a one-time service, while other business owners use it as an alternative financing solution when they need immediate working capital. While most business owners use spot factoring as needed, factoring companies treat every transaction with no expectation of future business. The costs of spot factoring are generally higher because business owners pay for control and convenience.
4. Auctioning Online
Among the other types of invoice financing, online auctioning is a unique way to finance your invoice. With an online auction, you can also choose which invoices you want to finance, upload those invoices to an online platform, and then lenders can bid for them.
5. Selective Invoice Financing
Selective factoring (also known as single invoice discounting) is a combination of traditional invoice factoring and spot factoring. It gives business owners more flexibility since it enables them to pick which invoices they are going to finance. They can finance one invoice or multiple invoices at once when they need to generate additional working capital. Selective invoice financing is also cheaper than having to finance every business invoice.
Nassau County Invoice Financing
If you want to know more about Nassau County invoice financing, the finance experts at SMB Compass’ can help and guide you through the steps. We’ve funded over a thousand small businesses in the United States and we’ll help you secure the funding you need and deserve as well.