Also known as receivables financing, it is a small business financing option that frees up cash flow from unpaid invoices. This strategy allows a small business to receive up to the full invoice value as an advance with a very low turnaround time. Giving you immediate cash injection to help weather a slump or finance a short term project.
The biggest advantage of using invoice financing as a strategy is that lenders consider the unpaid invoices as collateral, meaning that they are more concerned about the amount of the invoice than your credit history.
Where you sell the unpaid invoices to a lender in exchange for an advance of 70% to 85% of the invoice value. The lenders will then deal with your customers directly. Once your customer paid off the outstanding invoice to your lender, you will get the remaining amount.
Similar to factoring with the exception that your customers don’t know that you are using invoice financing.
While what matters is your invoice amount, lenders also look at the quality of these invoices to see if it makes sense for them to finance it. That being said, there are lenders who look at your credit report as well.
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