How is invoice factoring different than a commercial loan?

Simple: It’s not a loan and does not show up on your balance sheet as debt.

Factoring is the preferred non-loan alternative to a commercial loan, and a great way to immediately raise cash for any business purpose. Here are a few notable comparisons:

Businesses Funded Invoice Factoring Commercial Loan
Fast Growth YES NO
Start-ups YES NO
Profitable with no capital YES NO
Financial losses YES NO
Seasonal YES NO
Program Features    
Unlimited A/R Funding YES NO
No financial covenants YES NO
Advances up to 98% YES NO
Free credit checks YES NO
A/R management YES NO
Approval Process    
Financial statements needed NO YES
Dependent on personal credit NO YES
Must provide 3 years tax records NO YES
Lengthy approval process NO YES
Denied for IRS Problems – Tax liens NO YES

Is Invoice Factoring a type of commercial loan?  Absolutely not.

Even though accounts receivable factoring is sometimes referred to as “factoring loans”, it is a financial transaction between the business seeking funds and factoring companies, but no bank. Accounts Receivable Factoring (Invoice Factoring) is when a company, like Charter Capital, purchases your accounts receivable invoices at a discount and provides you with immediate cash.

Factoring can be a great alternative to commercial loans and give your business cash quickly for any business needs. The use of Accounts Receivable Factoring means that your sales (accounts due or open invoices) are “cash in the bank.” Funding is instant and unlimited, mainly because of the demand from your customers for your products or services.

Accounts Receivable Factoring Companies are a great alternative to a commercial loan for business funding

As an alternative source of business financing, invoice factoring eliminates many of the difficult-to-meet criteria that companies must face in order to get a commercial loan. If you can get a loan or line of credit in today’s tight banking market, what’s going to happen after you’ve depleted those funds? You will still have to wait for the invoices to be paid. The biggest problem with a traditional bank loan is that there is a maximum credit limit. Whereas Charter Capital provides no-loan cash based on the quality and liquidity of your assets (your accounts receivable). Because each account is evaluated individually, Charter Capital has much more flexibility than a Bank when it comes to keeping up with an increase in sales.

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