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Not many people know about invoice financing, however it is proven and viable funding solution for small businesses. If your business relies on pending invoices, did you know it’s not necessary for you to go weeks without proper cash flow? Invoice financing helps bridge cash flow gaps and provide business owners such as yourself with the funding you need. So, the question becomes, is invoice financing the ideal option for your business?

What is Invoice Financing?

Invoice financing allows business owners to sell your outstanding invoices to factoring companies at a discount. In return factoring companies give you 80%-90% of the total invoice value upfront. You then receive the remaining balance (minus a transaction fee) once your customers pay their invoice. This frees up funds you can use to pay monthly business expenses such as your rent, payroll, office supplies, as well as other daily operational expenses.

Who Qualifies for this?

This type of financing is best for small businesses without a huge cash reserve. It’s also beneficial for companies that don’t qualify for traditional loans due to low credit scores. This is because factoring companies are more concerned with your customers’ credit rating since they’re the ones paying the invoices. Many industries, such as those below benefit from Invoice financing, including:

  • Staffing
  • Construction
  • Transportation
  • Oilfield Service
  • Government Contract
  • Textiles and Apparel
  • Agriculture
  • Media Invoice
  • Consulting Companies
  • Manufacturing
  • Healthcare
  • Janitorial
  • And more!

Two Reasons to NOT Consider Invoice Financing?

Invoice financing is a great financing solution for many business owners, but as mentioned, it’s not for everyone. Obviously, if you don’t have pending invoices, it isn’t an ideal solution for you. Here are other factors to consider:

1.       Cost is an issue for your business

Companies that struggle to make ends meet should not consider invoice financing because it’s more expensive than traditional loans. If cost is an issue for you, it’s better to apply for a business line of credit. Although the application process is more tedious, it’s usually more cost-effective than invoice financing.

2.       Your company values privacy

With invoice financing, most factoring companies assume payment collection. This means your customers will be aware of the arrangement since they’re paying directly to the factoring company. This arrangement makes a lot of small business owners uncomfortable. They tend to worry that this payment arrangement may negatively affect their business relationships. Fortunately, online factoring companies or online lenders can offer more flexible options.

Apply for Invoice Financing Today!

There are many benefits that come with invoice financing, and it’s a great alternative to traditional business loans, especially if you need fast cash. The immediate working capital allows business owners to cover unforeseen expenses without taking on additional debt. However, you need to make sure you can repay the money your customers owe within the agreed terms. Otherwise, you might end up paying costly fees or paying the entire invoice yourself.

Before applying for invoice financing, or for any type of loan, evaluate your company’s long-term needs and goals and determine if invoice financing is for you. SMB Compass’ trusted financial experts can help you determine the best financing option for your business.

Simply call us today at (888) 853-8922 or email us at for more information.