What is accounts receivable financing?

Accounts receivable financing functions similarly to accounts receivable factoring, but instead of selling your invoices to a factoring company, they serve as collateral for a cash advance. While this leaves you with the responsibility of collecting payment from your customers, it also allows you to maintain a little more control.

What is accounts receivable factoring?

Accounts receivable factoring is the sale of unpaid invoices, whereas accounts receivable financing, or invoice financing, uses unpaid invoices as collateral. Business owners receive financing based on the value of their accounts receivable. After invoices are paid, businesses pay lenders back, with fees.

What is the difference between factoring receivables and a bank loan?

Factoring receivables involves a different process than taking out a bank loan, but the general goal for both is often the same: to provide the business with needed cash. For clarity, a factoring company or factor is a lender that provides financing through the invoice factoring process.