Bank Loan vs Invoice Factoring

Estimated reading time: 3 minutes

Entrepreneurs commonly ask us how invoice factoring differs from a traditional bank loan. We understand the language and benefits can seem tricky so the team at United Capital Funding (UCF) is here to help you better understand the differences.

The Basic Difference

Invoice factoring, also called accounts receivables factoring, comes down to four steps:

1. Provide a copy of your invoice to United Capital Funding.
2. United Capital Funding verifies the invoice with your customer, then pays you 80-90% of the invoice (advance) in cash.
3. United Capital Funding acts as your accounts receivables department and services the invoice.
4. Once your client pays 100% of the invoice to United Capital Funding, United Capital Funding pays you the 10-20% balance less a small professional fee (reserve).

When a bank offers you a loan, they’re primarily concerned with making back the amount you owe plus accumulated interest. If the bank approves your request, you’re entered into a complicated process. Banks aren’t on your side and typically only consider the financial reputation of the company and its owner. Both of which are likely not desirable in the case of new businesses and its owners.

That’s where invoice factoring differs. When you come to an invoice factoring firm for a financial jump-start, we “factor in” all the invoices you send to your customers. In other words, we fund companies that have creditworthy customers. We know that if you’re making money, you’re a trusted partner.

Support Your Team

As the lifeline of your new company, employees need to be paid on time. But while you’re waiting to receive money from your customers, your payroll deadline may come and go, leaving your employees with an unreliable income source. Our payroll factoring services allow you to meet payroll needs by funding invoices from approved customers as soon as they’re verified, giving you a reliable source of capital that you can count on for payroll.

Get Your Money’s Worth And More

When you’re starting a business, you often need an entire set of resources—in addition to faster capital—to grow and profitably manage your business. Our firm provides many of these key resources at no extra cost to your business:

• Credit investigation – we help you predict a customer’s ability to pay promptly, at no cost. This will help you avoid slow-paying and nonpaying customers.
• Save time – our seasoned professionals can reduce the payment time of your outstanding receivables.
• Accurate online reporting – we provide complimentary detailed accounts receivable aging and status reports through a secure online system that is available 24/7.

Unfortunately, a traditional bank loan doesn’t include many of these helpful resources. With the help of UCF, we allow you to focus your time and talents on managing and growing your business. These tools are part of how we help your business become a success.

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Invoice factoring is a great strategy for startup businesses and our team is ready to help!