Using Invoices for Collateral Loans

2 years ago

With a looming recession and rising cost of inflation, your business may be facing financial challenges. Instead of relying on a bank, you can now use your invoices for collateral loans. Here’s how invoice financing can help keep your business out of debt, or grow your business regardless of the challenges ahead.

What is Invoice Financing?

You can think of invoice financing, (or accounts receivable financing) as a collateral loan. This type of funding allows businesses to borrow money from a factoring company by using one or more invoices, or amounts due from their customers, as collateral for the loan. In exchange, the company receives a portion of the value of the invoices upfront (up to 90%) from the factoring company. They will provide the factoring company with their unpaid invoices as collateral for the money they receive.

If you work with invoices, you are likely constantly waiting on payment for products or services. With invoice financing, you can easily receive payment to avoid cash flow problems. Unlike a bank loan, this type of factoring is quick so you can receive cash in a few days, and in some cases within 24 hours! It also doesn’t require a strict credit check and good financial standing so if you are experiencing financial difficulties, you can still receive a constant flow of funds.

Invoice Financing vs Invoice Factoring

Invoice financing is often confused with invoice factoring but it is quite different. With invoice financing, your company retains control over the collections process and is responsible for collecting payments from customers. With invoice factoring, however, the factoring company takes over the collections process and is responsible for collecting payment directly from customers. Additionally, invoice financing is typically more flexible and customizable than invoice factoring, making it a better fit for many businesses.

Benefits of Invoice Financing

The benefits of invoice financing include:

Improved Cash Flow: Invoice financing allows businesses to access cash quickly and improve their cash flow, which is helpful during tough economical times.

Faster Access to Working Capital: Invoice financing provides businesses with faster access to working capital to pay bills, purchase inventory, and invest in growth opportunities.

No Debt Incurred: Invoice financing does not require businesses to take on debt. Instead, businesses are selling an asset (their outstanding invoices) to obtain funding.

Customizable: Businesses can choose which invoices to finance when to finance them, and how much to finance.

Creditworthiness of the Business is Not Needed: With invoice financing, the creditworthiness of the customers who owe on the invoices is more important, making it a great option for businesses with a less established credit history.

Kore Capital can help you obtain the funding your business needs to survive and thrive during even the most difficult financial challenges.