Spanish 
English 
As a fleet operator, there are many different finance and income challenges that you can find yourself facing. In retrospect, there are two different options you can go for to get support in this area: accounts receivable factoring or invoice financing. This big question is, what is best for your business? To find the answer to that, it’s important to understand what both of these are and what their differences are, so that you can choose a factoring de carga option that makes sense for your business going forward.
What is Accounts Receivable Factoring?
To break it down, accounts receivable factoring is the process of selling your invoices to a third party at a discount in exchange for immediate cash, instead of waiting the typical amount of time you’d usually have to wait. The flow would look like this: You receive the invoice, sell it to the factoring company, and the factoring company would pay you out immediately a portion of the invoice amount.
Benefits of Accounts Receivable Factoring
Immediate Cash: In this process, you are gaining immediate access to cash, which means you’re able to keep the cash flowing and utilize it for things like paying suppliers.
Credit Flexibility: This option is often lenient when it comes to credit, meaning that companies with less than perfect credit would still qualify for this financing option.
Debt Free: This type of financing isn’t a type of loan, meaning that there are no added debts to your credit.
Drawbacks of Accounts Receivable Factoring
Higher Cost: This type of financing can be more expensive when it comes to interest rates than taking out a traditional loan.
Customer Relationships: Customers will deal with the empresa de factoring when it comes to invoices, which some customers might not favor.
What is Invoice Financing?
Invoice financing is the process of getting cash on invoices that are owed to them by customers. The business would use their unpaid invoices to get a percentage of the invoice total before the customer actually pays the invoice. This bridges a gap that’s commonly an issue with fleet operations where there is a wait time for invoice payments, but invoice financing allows you to get paid immediately even if the customer hasn’t actually paid the invoice yet.
Benefits of Invoice Financing
Cash Flow: Like other financing options, invoice financing allows for improved cash flow as you are receiving immediate cash for the outstanding invoices.
Limited Credit Checks: Oftentimes there is no need for a credit check at all, which means that this financing option is widely available to many businesses.
Control Over Invoices: Businesses have the option to use this financing option on some invoices and not others, depending on what works for your business.
Drawbacks of Invoice Financing
Fees: There are fees associated with this type of financing that can be more expensive than other loans.
Protection Issues: There is limited protection when it comes to non-payment from customers.
Accounts Receivable Factoring vs Invoice Financing
Let’s look at the differences here between the two options as it relates to multiples areas to see where they differ and where the biggest similarities are at.
Accounts Receivable Factoring
Invoice Ownership: Sold to the factoring company
Payment Collection Responsibility: Factoring company
Balance Sheet/Debt: Not on balance sheet/no debt
Customer Notification: Often notified and working directly with factoring company
Invoice Financing
Invoice Ownership: Full ownership retained by the business
Payment Collection Responsibility: Business
Balance Sheet/Debt: Debt and liability recorded
Customer Notification: Usually not notified and working directly with business still
Which One Is Right For You?
Choosing between accounts receivable factoring and invoice financing might still be a difficult decision, which is completely understandable. It can be difficult to understand what would be good for your particular business, but ultimately it can depend on many factors that have to do with your unique business.
Urgency of Cash Flow
One of the main things that you should consider when choosing an option is if you need cash flow instantly and don’t want to wait those 30, 60, or 90 days that it typically takes to get the money you’re owed. If you need cash instantly, then factoring might be the better option for you because although you’re selling the invoice at a discounted rate, you’re still going to receive a portion of your owed funds immediately upon selling.
Customer Relationships
One of the major differences between invoice financing and factoring is the customer relationship factor. If you’re a business that wants to deal directly with your customers then you might want to consider invoice financing. Invoice financing allows you to be in control of your invoices and deal directly with customers, while factoring would be the third party that connects with your customers for you. If you don’t mind a third party company directly dealing with customers, then factoring might be the better option.
Debt Consideration
Whether you’re in good standing or not when it comes to credit, you’ll want to evaluate if you want to take on any extra debt when choosing a specific financing option. Invoice financing does appear on your balance sheet as a liability and will affect your debt, but factoring will not. If you’re not looking to add debt or want to keep your balance sheets clean then you should consider factoring.
Pricing Structure of Options
You should consider whether you’re looking to pay more to have these financing optins or if you want to keep costs at a minimum. Overall, factoring can be more expensive when looking at interest rates, making invoice financing the more affordable option overall.
Choosing TBS Factoring for Your Business
If you need more information or think that factoring might be the better option, we’ve got you covered at TBS Factoring. Factoring companies are able to get you immediate cash flow without the need to deal with customers yourself. We make it super easy with our additional offerings and we help you keep the flow of cash coming into your business instead of waiting months for a paid invoicing. Póngase en contacto con nosotros to learn more about our factoring options and how we can help you start earning cash for your business today.
