Perhaps two of the most commonly confused terms in business funding choices, are accounts receivable financing and factoring. At United Capital Funding, we provide small businesses with factoring services, which provides funding advances on accounts receivables.
Taking a closer look at accounts receivable financing vs factoring will help eliminate any confusion between the two terms. While they both offer options for short-term cash flow challenges, they are not the same.
The Factoring Advantage
One of the biggest differences in accounts receivable financing vs factoring is the role that the factor plays. With factoring, we will advance up to 80% of the value of the invoices within days of your application. At this point, we also take over the management of the accounts, which means there is no need for you to collect or to deal with tracking down customer payments.
We allow your business to choose the accounts you wish to factor. We also charge just one fee, which you will receive in our quote, without any additional charges. We also don’t have minimum volume requirements and we do not charge application or termination fees.
Accounts Receivable Financing Basics
With accounts receivable financing there is a similar application process, but the accounts receivables are used as collateral for the advance. The business is still responsible for dealing with the collection of the invoices and keeping tabs on any customers that are late in paying. In addition, the business will need to arrange for submiting those payments to the financing service.
If you still have questions about accounts receivable financing vs factoring, give our experts a call today at 877.894.8232. We can help you to evaluate your business needs to make the right choice.