Business Factoring Versus Business Credit Cards

Taking out a small business loan is not always possible for a startup, entrepreneur, or even an established small business with a less than perfect credit history. When business loans are not possible, many small business owners assume their only other option is to apply for business credit cards.

There is, however, one other option that is well worth consideration. This is the use of business factoring, or selling your B2B accounts receivables to a factoring company. Not all factoring companies are the same, but our services are some of the most highly regarded in the industry, and our experience and expertise speaks for itself.

To understand the differences between business credit cards and business factoring let?s take a closer look at the pros and cons of each option for the typical small business owner.

Business Credit Cards

Business credit cards are not as easy to obtain as they were in the past. Most will require completing a fairly lengthy application and submission, then waiting for weeks to learn if you have been approved. Online applications are faster, but there is often a delay of a few weeks until the card arrives.

Business credit cards have spending limits based on the creditworthiness assigned by the credit card company. Often for small business these limits will not cover major expenditures such as inventory purchases, capital improvement needs, or hiring new employees for an upcoming expansion or one-time project.

In addition, the interest rates for business credit cards can be significant, which will impact the overall credit rating of the business as long as the balance is on the card.

Business Factoring

The opposite of paying for business expenses on a credit card is found in business factoring services. In this scenario there is no loan, no extension of credit, and no borrowing involved.

Instead, the small business sells the B2B accounts receivables, the closed sales, to us. We then provide working capital to a set percentage of the value of the accounts receivables, which is typically 80%. We then assume all the collection and backroom services for the AR we have purchased.

Once we have collected from your customer, and the invoice is paid in full, we deduct our pre-set fee and provide you with any residual payment. This process frees you up from going into credit card debt while still giving you the working capital you need in advance of when the invoice is due from your customer.

As a top business factoring company, we want to develop a working relationship with small businesses to help them to thrive and grow. We can provide collateralization of B2B accounts receivables on an ongoing basis or as needed. All you need to do is complete a simple online application to get the process started.