What Is The Difference Between Invoice Factoring & Invoice Financing?

Capital has an indispensable role to play in overall functions and growth of any business. In simple words, any business can’t survive without sufficient capital. Not only at initial stages but capital is required all through business for successful and continuous operations. After manufacturing and selling of the end-products to the users any business may feel scarcity or shortage of capital or sufficient funds for further operations. This gap is filled by Wisconsin Invoice Factoring Companies and such other entities existent in the relevant field. These companies or agencies provide funds or offer finance to the business owners for smooth and continuous business operations.

Numbers of terms are used in the business world in relation to finance. Invoice Financing and Invoice Factoring are two such terms that are used quite commonly in the business world. Suggested by the name both these are related to finance. However there are some essential differences in the two as illustrated below.

Difference in the mode of financing

As far as Invoice financing is concerned, it is a general term that denotes asset based financing. It means the finance is provided to the business owners against assets and lets companies to finance slow-paying accounts receivable. On the other hand, invoice factoring as approved by the Wisconsin Invoice Factoring Companies or such others is a mode of finance under which payment is released to the borrowers immediately. In such a case, an unpaid or pending invoice is used so that the concerned owners may get the face value of the same after deduction of some meagre amount of fee.

Difference in the speed of payment release

Since invoice financing is a type of asset based loan therefore it takes some time for its approval. The business owners need to wait for some time to get finance against such a loan. In contrast to this, business owners get their payment very quickly by the lenders such as Wisconsin Invoice Factoring Companies. It is because they just have to show the invoice against the goods sold to their actual clients. They get payment in exchange for the invoices for smoother business operations.

No assessment in case of invoice factoring

In the process of invoice factoring, no assessment of the assets is involved. In this case, only pending or unpaid invoices are taken into consideration by the lenders. Thus it is just a clear cut and direct dealing where the lender lends money to the borrower and then recovers the same from the actual clients. In case of invoice financing, the lenders do consider the asset or revolving credit line of the borrower. It is somewhat similar to a bank loan where the financial capacity and credit history of the borrower is considered. It is somewhat time-consuming and may take few days for granting the loan to the borrowers. On the other hand, the process of invoice factoring is free from all such formalities and issues money immediately to the borrowers.

Definitely, invoice factoring and invoice financing are both beneficial for the business owners. Both these processes help in fulfilment of emergent financial needs of the businessmen in somewhat distinct ways.

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