Business owners often find themselves in situations where they need to access funds quickly in order to keep their business running smoothly. While there are several financing options available, two of the most popular are invoice factoring and merchant cash advances. In this post, we will discuss four ways that invoice factoring compares to – and exceeds – merchant cash advances, so you can make the best decision for your business.
Speed of Application Process and Approval Rate
Invoice factoring is a much faster process than merchant cash advances because it does not require any credit checks or time-consuming application processes. Instead, all you have to do is provide copies of your recent invoices as proof that you have customers who owe you money, and the lender will approve your loan within days or even hours. Merchant cash advances, on the other hand, involve more paperwork and a lower approval rate due to their strict credit requirements.
Flexibility of Repayment Terms
Invoice factoring offers more flexible repayment terms than merchant cash advances because it is based on your current receivables rather than your future sales projections. This means that if you experience a decrease in sales one month, you won’t be penalized with higher payments; instead, you can simply pay back less until things start picking up again. With merchant cash advances, however, your repayment schedule is locked in from day one regardless of what happens with your sales forecast.
Cost and Interest Rates
The cost and interest rates associated with invoice factoring are typically much lower than those associated with merchant cash advances. This is because invoice factoring is based on existing invoices rather than future revenue projections; therefore lenders view it as less of a risk. Additionally, since there are no credit checks involved with invoice factoring loans, lenders don’t need to charge high interest rates to offset the risk that borrowers may default on their loans.
Invoice factoring is an excellent option for business owners who need access to working capital quickly without going through a lengthy application process or worrying about strict repayment terms and high interest rates. By leveraging existing accounts receivable as collateral for the loan amount requested, business owners can rest assured knowing that they have access to funds when they need them most without having to worry about expensive fees or stringent repayment requirements like those seen with traditional business loans or merchant cash advances. If you’re looking for an efficient way to fund your business venture without putting yourself at financial risk, then invoice factoring might be just what you’re looking for!
Are you looking for financing options for your business? If so, Synergy Commercial Funding is ready to help. We offer a wide range of commercial finance services to help businesses of all sizes achieve their objectives, whether it’s purchasing new equipment or purchasing a new commercial property.
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