Invoice Factoring: A Side-by-Side Comparison with Traditional Funding Solutions
The most traditional funding solutions available to businesses in need of working capital are bank loans, leasing, going public, venture capital, private investors and government programs.
The pros and cons of each funding solution are primarily determined by your company's financial needs and how your needs relate to the terms and requirements set forth by the funding mechanism. Determining which solution or combination of solutions is right for your company can be a daunting task, and there are always "deal-breaking" factors.
Some of the most critical factors in selecting a funding solution are compared below for each funding solution.
| Leasing | Going Public |
Venture Capital |
Bank Loan |
Private Investor |
Government Programs |
Invoice Factoring |
|
|---|---|---|---|---|---|---|---|
| Simple Application | No | No | No | No | Depends | No | Yes |
| Days to Fund | 15-30 | 120-270 | 90-180 | 60-180 | 15-90 | 60-180 | 3-10 |
| Based on Credit | Yes | Yes | Yes | Yes | Yes | Yes | No |
| Tied to Sales | No | No | No | No | No | No | Yes |
| Give Up Equity | No | Yes | Yes | No | Yes | No | No |
| Give Up Control | No | Sometimes | Yes | No | Sometimes | Sometimes | No |
| Limited to Asset Value | Yes | No | No | Yes | Maybe | Yes | No |
| Require Profitability | Usually | Yes | Usually | Yes | Usually | Usually | No |
| On-Going Monitoring | No | Yes | Yes | Yes | Yes | Yes | No |
| Reduce Overhead | No | No | No | No | No | No | Yes |
- Simple Application — completed within hours; processed within days; requires only basic information
- Days to Fund — number of days to receive funding from the time the application is submitted
- Based on Credit — funding approval is based on your company's credit
- Tied to Sales — amount of funding received is based on your company's sales
- Give Up Equity — equity in your company is turned over to external investors
- Give Up Control — control of business operations are turned over to external investors
- Limited to Asset Value — funding amount is based on the value of your company's assets
- Require Profitability — funding requires your company to increase earnings
- On-Going Monitoring — your company must monitor and/or maintain funding after initial distribution
- Reduce Overhead — reduce costs associated with collection, ledgering and other data maintenance