Accounts Receivable Factoring Vs. Merchant Cash Advances: How Things Stack Up

Of the most popular alternatives to traditional loans, accounts receivable factoring and merchant account cash advances top the list. In order to give business owners a better idea of how the two stack up, we put together a side-by-side comparison of accounts receivable financing vs factoring of merchant cash advances according to the features entrepreneurs look for the most in financing solutions.

1. Debt-Free Financing

Merchant Account Cash Advance: An advance in funding with no debt on the balance sheet.
Accounts Receivable Factoring: Cash for receivables with no debt on the books

Advantage: Equal

2. Interest and Fees

Merchant Account Cash Advance: High interest and additional fees baked into the agreement.
Accounts Receivable Financing: No interest or additional fees. The amount of financing is structured around the creditworthiness of your customers.

Advantage: Accounts Receivable Factoring

3. Repayment

Merchant Account Cash Advance: The Balance is repaid from a percentage of sales with a large balance remaining at the end of the terms.
Accounts Receivable Factoring: There is no repayment. The Accounts Receivable factoring is an instantaneous transaction with no need for terms or contracts.

Advantage: Accounts Receivable Factoring

4. Funding Limits

Merchant Account Cash Advance: Single-use and based on average monthly revenue.
Accounts Receivable Factoring: No upper limits. Businesses can choose which invoices or parts of invoices are funded, and factoring is reusable for as long as your business issues invoices.

Advantage: Accounts Receivable Factoring

5. Versatility

Merchant Account Cash Advance: Typically used for short-term growth or working capital.
Accounts Receivable Factoring: Accounts receivable factoring can be used to correct cash flow issues, build up cash reserves, growth and working capital, making payroll, paying down existing liabilities, purchasing inventory and materials, advertising, and anything else your business needs.

Advantage: Accounts Receivable Factoring

6. Agency and Control

Merchant Account Cash Advance: Borrowers are subject to the interest, fees, and terms of the agreement.
Accounts Receivable Factoring: Businesses have a complete say in how much of their receivables get funded. As there are no fees or contracts, businesses can create their own factoring strategies tailored to their needs and goals.

Advantage: Accounts Receivable Factoring

New Century Financial is a national leader in accounts receivable factoring solutions. We provide comprehensive factoring strategies when comparing accounts receivable factoring vs factoring for merchant cash advances to help businesses thrive and achieve long-term success.

Find out more about how factoring compares to loans and merchant cash advances where the advantage of factoring is for you to sell your receivable invoices to a factoring company. At New Century Financial you can receive as much as 90 percent of the invoice amount in cash within 24 hours. It works with the credit line being based on the financial strength of your customers instead of your business. When your customer pays the bill, you receive the remaining cash minus a small service fee.

Contact our team today to learn more about how New Century Financial can improve your cash flow and help your business accumulate the capital it needs for growth.

Take five minutes to read our “Entrepreneur’s Guide to Factoring” for more information and call us at 800-805-8380 or Apply Now to get started.