Summary
Invoice Financing: - types - best companies
93 %

Invoice financing helps businesses improve cash flow, pay employees and suppliers, and reinvest in operations and growth earlier than they could if they had to wait until their customers paid them. Invoice financing is a general term used whenever a third party agrees to buy your unpaid invoices for a fee.

With invoice financing, a business could get a fast advance financing of about 85% of the value of your invoices, with most of the other 15% paid to you later. It’s the perfect solution to cover for late-paying customers or cash flow slowdowns.

Invoice Financing Offers

BlueVine gives small businesses an immediate advance on their outstanding invoices. We help businesses that experience long payment cycles or have lumpy or irregular cash flow free up their cash. 

Apply Now

Fundbox offers business owners a simple way to fix their cash flow by advancing payments for their outstanding invoices. Fundbox is a small business solution designed by a small business. 

Apply Now

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Types of Invoice Financing

  • invoice factoring
  • invoice financing
  • receivable based lines of credit

Invoice Factoring

It is a common financing option for industries like clothing or manufacturing, where long accounts receivable are part of the normal business cycle. Factoring works by providing a cash advance based on the total value of the invoices. You typically receive 50-80% of the invoice value upfront based on the risk profile of your clients. You receive the remaining value once the client pays off the invoices, minus a factoring fee. This fee can be structured in any number of ways, but it generally nets out to be about 3-5% of the invoice value.

Invoice Financing

It is like factoring except that it’s not a sale of your accounts receivable. You use the account receivables as collateral to get the advance. And you are ultimately responsible for managing the customer relationships and payments. If your customers become delinquent, you will be responsible for the amount you advanced. The fees are usually 2-4% of your invoice value per month.

Receivable Based Line of Credit

It is a credit line based on a percentage (usually of 80-85%) of the value of your outstanding invoices. The value is calculated based on the * ageing* of the invoices. Namely, they give full value for current invoices and a discount for overdue invoices. You will pay a pre-negotiated interest rate based on your balance. When an invoice gets paid, your balance will be reduced. There’s usually a fee when you draw the credit line. But this is usually a cheaper option than invoice factoring or invoice financing with APR less than 20%.

Pros and Cons of Invoice Financing

Pros:Cons:
Fast approval, minimal paperworkRelatively high rates
Helps mitigate cash flow emergenciesNeed invoices as proof/collateral
Transparent, easy-understandable pricingGenerally doesn’t work for B2C businesses

Who usually use Invoice Financing:

  • B2B Businesses
  • Seasonal Businesses
  • B2B Businesses with Big, Well-Respected Clients
  • Businesses in Industries with Long Billing Cycles — e.g. Clothing, Retail, Manufacturing, etc.
  • Businesses with Large Invoices and Purchase Orders

Invoice Financing Offers

Invoice Financing to your business

BlueVine gives small businesses an immediate advance on their outstanding invoices. We help businesses that experience long payment cycles or have lumpy or irregular cash flow free up their cash. 

Apply Now

FundBox. Invoice Financing

Fundbox offers business owners a simple way to fix their cash flow by advancing payments for their outstanding invoices. Fundbox is a small business solution designed by a small business. 

Apply Now

Conclusion

The overall APR, typically 15-35%, is high if you compare to that of banks or online term lenders. But it’s a good short-term solution when most of your short-term assets are tied to accounts receivable, that lets you avoid the lengthy bank loan application.

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