Types of Invoice Finance and Invoice Factoring
There are currently three types of invoice finance available to business owners; invoice factoring, invoice discounting, and invoice finance. Each of these has its advantages and disadvantages depending on your business situation. Before you decide what type of invoice finance is best for your business, you should research the options to determine which one will provide you with the most advantages. Invoice factoring is considered by many to be the most cost-effective way to obtain funds to settle outstanding invoices and claims.
Invoice Factoring
Invoice factoring is a form of debt protection that requires no credit checks and is very simple to qualify for. You sign an agreement giving the lender permission to sell your outstanding invoices to collection companies for a fixed fee each month. The fee is typically higher than the amount you would pay to have your credit checks done but the factoring company does not require you to have good credit to qualify for this option. You may still be able to get paid from a higher interest rate and reduced fees if you have less than perfect credit.
Invoice Factoring Is A Non-Recourse Agreement
This means that you do not have to repay anything to the finance provider if they fail to settle your outstanding invoices promptly. If you are unable to pay them, the finance provider has the right to pursue you in small claims court or bankruptcy court without recourse to collect the money. You can also negotiate a non-recourse agreement with your …
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