Editor's choice: FundThrough Express business cash advances
- Mobile-friendly platform
- No contracts
- Loans up to $50,000
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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.
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.
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.
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:
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:
Businesses that generate most of their revenue from invoices would benefit most from this type of financing. A few examples include:
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