Invoice Financing at a Glance

Invoice Financing also know as accounts receivables financing companies advance you cash secured by your business’s outstanding invoices—providing you a great way to inject money into your business right away. With invoice financing, you could get a fast advance of about 85% of the value of your invoices, with most of the other 15% paid to you later. This makes it an excellent way to solve the problem of late paying customers or slowdowns in cashflow. 

Pros and Cons of Invoice Financing 

No waiting for invoice payment

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Invoices serve as collateral

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Based on credit of the invoiced

business

May have higher fees than 

traditional financing

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Fees based on time for invoice

to be paid off

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Who Qualifies for Accounts Receivable Financing?

Any business who supplies products or services to other businesses can qualify for invoice financing, as long as they currently have outstanding receivables.

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Here’s the deal.

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Lenders offering this type of financing don’t care as much about your business revenue, profitability, or time in business.

Since your invoices will be used as collateral for the loan, lenders just want to be sure the invoices are worth financing. The others parts of your business don't matter as much. 

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Most Customers who qualified had 

Annual Revenue

Over $130,000

Time in Business

Over 1 year

Credit Score

600

What documents will I need to apply? 

• Driver's License

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• Voided Business Check

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• Bank Statements

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• Credit Score

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• Outstanding Invoices

How Much Financing Can You Get? 

The total amount you qualify for depends on how many invoices you have, the quality of those invoices, and your overall creditworthiness as a borrower. 

Your credit will be a factor to some but not all accounts receivable financing lenders.

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How Does Invoice Financing Work?

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One of the greatest frustrations a growing business faces is waiting for invoices to be paid. This frustration can be compounded even further when customers don't make on time payments.  

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When customers delay payments it can completely tie up your working capital and put a strangle hold on your business growth creating multiple problems to deal with. 

One of the best solutions to combat this problem is invoice financing. With Invoice financing you don't have to wait to be paid on your invoices, instead your paid right way. 

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To make finding the right invoice financing lender easier for you, we've created a way for you to compare invoice financing lenders side by side to find the best option for your business.

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Solve Cash Flow Problems with Accounts Receivable Financing

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What if you could guarantee you’ll see cash for those invoices right away?

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That’s exactly what accounts receivable financing—also known as invoice financing offers your business.

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While this can sometimes be a more expensive way to fund your business compared to options available to those with great credit, it can be perfect for those with less then optimal credit running short on capital for upcoming expenses like payroll, tax or starting on your next project. 

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It will also help you sleep more soundly at night knowing you'll never have to tell your employees that your short on paying them because of cash flow problems. 

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Accounts Receivable Financing: Crunching the Numbers

After agreeing to collateralize some of your invoices for a loan from an invoice financing company, they'll usually advance you about 85% of the value of your invoices. 

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The 15% that's left over is held in reserve and subjected to fees until your customer pays off their invoice. 

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Out of that 15%, your lender keeps a processing fee which is usually around 3%. They'll also charge a "factor fee" which is determined by how long it takes for your customers to pay their invoices. This is often calculated on a weekly basis. 

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For example, most lenders charge 1% each week until payment

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After the lender deducts their fees, you'll receive the remaining amount left over from the 15%. Basically your paying these fees for access to cash now instead of having to wait for the customer to make payment. 

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Simply put...

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Accounts receivable financing is a convenience fee for your business’s working capital.

A Different Kind of Accounts Receivable Financing

Although this is the usual experience, there are different types of accounts receivable financing available. 

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For example, there are accounts receivable financers that will advance you 100% of the outstanding invoices. In return, the lender is paid back on a weekly basis over a set period of time (usually 12 weeks) until the advance is fully paid. 

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In cases like this, you never get stuck waiting for your customer to pay back their debt, although the lender may start collecting directly from your customer instead. 

What What Will Accounts Receivable Financing Cost You?

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Let's imagine you have a $100,000 invoice with 30-day terms. 

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An invoice financing company may advance you 85% of this amount ($85,000) and hold $15,000 in reserve.  

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Now lets say your customer pays the invoice 2 weeks later.

After deducting the 3% processing fee of $3,000, the financing company then keeps its factoring fee of 1% per week which would be 2% or $2,000 (1% per week x 2 weeks = 2%), and gives you the $10,000 left over.

This means you would pay $5,000 in total to borrow the $100,000.  

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Is Accounts Receivable Financing

Worth It?

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Some business owners may feel like $5,000 is a high price to pay while others would still be able to turn a good profit even after paying the $5,000. It all comes down to your businesses financials.  

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If you needed to borrow money to pay employees a week after sending out that invoice then the fees for accounts receivable don't seem to steep after all. 

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If your business could benefit seriously from the extra cash flow being there when you need it most then it could definitely turn out to be worth the fees. 

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Best Invoice Financing Companies of 2019