Over the last few decades, tighter bank lending requirements have left many companies with fewer options for financing. Factoring companies, with their less restrictive entry requirements for accounts receivable financing (AR financing) and their additional customer benefits, are now filling a crucial funding gap in the market.

Growing your business, creating jobs and contributing to the economy requires working capital. Many companies are struggling to grow their businesses because borrowing funds has become increasingly difficult. According to a survey by the Federal Reserve Bank of New York, the majority of businesses cite “access to capital” as one of the top roadblocks in establishing and growing their businesses. One funding option that is gaining traction in the business community is factoring. Here are some of the main differences between accounts receivable factoring programs and bank loans:

Bank loansAccounts receivable financing programs
  • Lengthy approval process
  • Need collateral
  • Need an established credit history
  • Approved within a few days
  • No collateral is needed
  • Your customers’ credit history evaluated instead of yours
  • An additional line of debt will be added to your business
  • Loans are required to be repaid based on projected earnings, which are neither known nor guaranteed
  • Accounts receivable financing is not a loan so no additional debt is incurred by your business
  • Your cash advances on your accounts receivable reflect what you have earned, not what you are projected to earn
  • No additional services are offered by banks
  • Factoring companies offer their accounts receivable financing clients value-added services such as professional collections, credit screening of new customers, extensive online recordkeeping, optional invoice preparation, and more
  • Banks only approve a certain amount that you must pay back
  • Your funds grow as your business grows without limits

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Summary

Bank Loan or AR Financing? You Decide

Growing your business requires working capital. In the old days, borrowing from a bank was the answer, but tighter lending requirements have changed all that.

Now business owners have options, including accounts receivable financing programs.

Let’s compare these two funding sources:

Bank Loans have a long approval process

AR Financing has a short approval process

Bank Loans require collateral

AR Financing does not require collateral

Bank Loans  requires a strong credit history

AR Financing does not require good credit

Bank Loans you incur debt

AR Financing is not a loan so NO debt is incurred

Bank loans don’t come with additional benefits

AR financing provides value-added services such as credit checks, collections services, recordkeeping and optional invoice preparation

Interstate Capital has nearly 25 years of experience helping companies speed up their cash flow through accounts receivable financing.

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AR financing vs Bank Loans