In the world of alternative financing, invoice factoring is one of the leading solutions for businesses. Yet at the same time, invoice factoring has been around for literally thousands of years. So how did invoice factoring get a reputation as an “alternative” solution, and how does it compare to other forms of financing?
Banks Do Not Like Invoice Factoring
One of the reasons invoice factoring is spun as “alternative financing” can be traced back to banks. Banks generate profits from their clients by impacting credit ratings, placing debt on the books, and charging interest on the balance owed. By contrast, factoring is debt-free, and there are no ongoing payments. Invoice factoring is a simple transaction that turns unpaid receivables into cash, boosting business cash flow and allowing entrepreneurs to get ahead. In short, invoice factoring is very fast, efficient, and affordable. Therefore it does not offer banks much in the way of profitability. Over the years, banks have downplayed invoice factoring to get business owners to take on debt through loans because of the higher profit margins. Thus invoice factoring has come to be considered a form of alternative financing.
Invoice Factoring and Other Alternative Financing Programs
Invoice factoring has since been lumped in with other alternative financing programs, such as merchant cash advances (MCAs). While MCAs and other alternative forms of financing like to advertise themselves as not putting debt on the books, that’s where the similarities end when comparing them to invoice factoring. MCAs and other alternative financing programs have lots of hidden fees. Additionally, they have high-interest rates because they are essentially loans and they need to compensate for the risk because they do not place debt on the balance sheet.
Invoice factoring from New Century Financial is not a loan. The process does not place debt on the books, and there are no ongoing payments with high interest and hidden fees. Our process is streamlined. Businesses submit their unpaid customer invoices to us, and we turn them into cash within 24 hours. The process is literally that simple. There are no long-term contract agreements; let businesses choose which invoices or parts of invoices we factor in.
If you want to break out of the debt cycle of traditional loans or avoid the hidden fees and high-interest rates of MCAs and other programs, try the “alternative to alternative financing.” Contact New Century Financial today and learn more about our invoice factoring services can benefit your business.