There are only so many ways for a small business to find funding. This often excludes the use of traditional bank loans or even small business loans due to complicated requirements to be approved. A line of credit from a traditional financial institute poses the same obstacles.
At United Capital Funding, we understand these issues, which is why we focus on working with small businesses for factoring. To help you understand the differences in factoring and a line of credit, take a few minutes to look closely at the pros and cons of each.
Factoring is simply an advance on the accounts receivables. It is not a loan and there is no repayment. We typically provide 80% or more of the value of the invoices we approve in just days, allowing you to get the funds you need. We then collect from your customer, deduct our fees from the 20% held and send you the balance.
Lines of Credit
A line of credit is basically a reserve of cash, up to a pre-set limit, which the small business can access as needed if they can qualify. Different from a loan, the business only pays interest on the amount they use out of the line of credit, helping to reduce repayment and interest and prevent the management fees that go with this option.
One of the differences between factoring and a line of credit is that factoring charges one flat fee that is a percentage of the accounts receivables. With United Capital Funding, there are no additional costs or fees and no charge if you choose not to use the service.
To learn more about the differences between factoring and a line of credit, talk to our small business factoring experts at 877.894.8232.