Difference between Invoice Finance & Invoice Factoring
These two debtor finance options are great to help your business manage growth without having to wait for clients to pay you. There are subtle differences but it is important to understand each option.
Invoice Finance allows businesses to access funds whilst waiting for invoices to be paid. It is a short-term loan that allows you to secure upto 80% of the overdue invoice amount owed to you.
With Invoice finance, the business essentially still needs to follow up collection of payment for the invoice. When payment is made then Invoice Finance Provider (FiFO Capital Ireland) is compensated.
Invoice finance does not require any collateral, making it an easier option to acquire finance than a traditional bank loan. And because you don’t need to go through a funding approval process like you would with a bank, the process is quicker. You will have cash quicker in your bank account.
Another advantage of Invoice finance is that it does not have long-term commitment.
The main disadvantage is that you still need to chase payment meaning more resources within your team is required. And if the customers does not pay, then additional fees may be past onto you from the lender.
Invoice Factoring helps the business secure funds against overdue invoices (30 to 90days). Similar to Invoice financing, the business can secure up to 80% of the outstanding amount and the process is as quicker as there is no bank approval required.
The main difference is that the responsibility of chasing the overdue invoices is with the factoring company like Fifo Capital Ireland. Once the invoices have been paid in full, the factoring company will provide the difference after fees.
All payments are followed up by the factoring company, Fifo Capital, and is paid by the business’s clients. No more stress of following up overdue invoices – all the risk is on us.
Due to the credit risk, Fifo Capital conducts an assessment on your client. If payment is difficult to collect or the business’s client fails to pay, then the business will need to back the fund given up front.
It is best to speak with an Invoice Finance or Factoring expert like Fifo Capital to help determine the best way to secure funding for your business.
Now is the time to speak with a Financial Specialist and discuss your current and future financial plans for your business. At Fifo Capital, our experts can help you deal with inflation. Contact FIFO Capital Ireland today.