Invoice financing for businesses that rely on accounts receivables

Breaking ground as a new form of borrowing with reduced risk, invoice financing relies only on customer payments for success. Unlike other types of lending, you don’t have to secure your loan with an asset. You just need a steady stream of revenue that is backed up by invoices from your clients.

If you’re tired of waiting weeks or even months for invoices to be paid and need a more consistent source of working capital, invoice financing might be something to consider.

How does invoice financing work?

Invoice financing is when a lender gives you an advance on your pending invoices. Just submit your invoices to the lender, and you’ll receive the amount of the invoice minus a percentage as payment. When the client pays you, you pay back the lender.

What are the costs of invoice financing?

Most invoice funding companies will lend you a large percentage of the total value of your invoices. An advance fee may also be charged, usually between 2-5% of the invoice amount. The exact costs involved will depend on your business and the lender.

If you’re unsure about using invoice financing for your business funding needs, read our guide on business loans to compare other borrowing options.

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Name	Product	Filter Values	Loan amount	APR	Requirements
Kickpay e-commerce loans			$20,000 – $1,000,000	Not applicable	At least $250,000 in the past 12 months of revenue, e-commerce business, use a 3rd party fulfillment center for storing and shipping inventory, at least one US location.	Get a loan for your e-commerce business based on your sales history.	Check eligibility More Info		loading Fetching your data...
FundThrough Express Invoice Financing			$500 – $50,000		Considers your business’s invoicing and banking history	Get an advance of up to $50,000 in just one day with this fully automated platform.	Check eligibility More Info		loading Fetching your data...
Fundbox			$1,000 – $100,000	4.99	You must have an established business.	Get flat rate, short-term financing based on the financial health of your business, not your credit score.	Check eligibility More Info		loading Fetching your data...
Lendio business loan marketplace			$500 – $5,000,000	Starting at 6%	Operate business in US or Canada, have a business bank account, 560+ personal credit score	Submit one simple application to potentially get offers from a network of over 75 legit business lenders.	Check eligibility More Info		loading Fetching your data...
Become business loan marketplace			$5,000 – $500,000	Starting from 7.5%	At least 3 months in business with $10,000 in monthly revenue or at least 6 months in business with $3,000 in monthly revenue.	Compare loan offers from top lenders using this marketplace. It’s free & won’t affect your credit.	Check eligibility More Info		loading Fetching your data...
Interstate Capital Factoring			100% of your unpaid invoices	Varies	Business in good standing with no existing tax liens	Free up working capital with an advance on up to 100% of your unpaid invoices.	More Info		loading Fetching your data...
BlueVine Invoice Factoring			$5,000 – $5,000,000	0.2% to 1.3%	530+ personal credit score, 3+ months in business, $100,000+ annual revenue	Invoice factoring with the flexibility to fund only the invoices you choose.	More Info		loading Fetching your data...

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How to compare invoice financing providers

As with other types of lending and credit services, there are several points you can use to help select the best invoice financing provider for you. Here are a few things to consider before you decide which one may be right for your business:

• Advance fees. These are typically charged at around 3% of each invoice. However, funding providers may increase this if they view your company as less financially secure, for example, if you have a poor credit rating.
• Additional fees. Some providers will charge you exchange and transaction fees along with discount fees from early payment offers made to your clients.
• Loan amount. Many invoice financing providers are set up to offer a personal, efficient service to small businesses. However, bigger companies may be better suited to a bank or service that can handle a larger quantity of invoices.
• Repayment options. Make sure you know each provider’s policy on late repayments, just in case a client lets you down.
• Specialized providers. Some invoice financing providers specialize in servicing specific industries. For example, trucking companies can use freight factoring to sell their invoices at a discount and get quick access to the money. As another example, FastPay is a lender that specializes in invoice financing for digital media companies.

Invoice financing vs. invoice factoring: what’s the difference?

If your business relies heavily on invoices, you may have heard the about invoice factoring as well as invoice financing. Here’s the difference between the two:

• Invoice financing. Invoice financing is usually an ongoing relationship with a lender and business. Some lenders charge a monthly fee for you to submit invoices and borrow money against them on a regular basis. You may also be charged different amounts based on how long the period is between when you submit the invoice for borrowing against and when you repay the lender.
• Invoice factoring. Invoice factoring is a process in which you sell your invoice to third-party. That third-party company pays you a percentage of the invoice and then collects money from your client directly. This is more of a one-off arrangement.

Compare invoice financing vs. invoice factoring

Benefits and drawbacks of invoice financing to consider

Frequently asked questions about invoice financing

• Can any business use invoice financing?

  Different lenders have different eligibility requirements for businesses they accept. Some specialize in businesses in certain industries, while others don’t. Be sure to read the lender’s qualification criteria before applying.

• Will my customers know I’m using an invoice financing company?

  This will depend on the lender. Some offer a completely confidential service while others will want to verify your clients. Having your lender in contact with your clients can be useful, as they can help you to chase up those that have unpaid invoices. Just make sure they don’t communicate with clients in a way that could undermine your relationship with them.

• Whose job is it to collect the invoice from the customer?

  While the invoice financing company might approach your customers for verification purposes, it remains primarily your responsibility to have the invoice paid.

• How do I make an invoice that can be used for financing?

  You can submit any valid invoices for financing. Use our guide to writing an invoice to make sure yours has all the necessary parts.

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