Amount: $2k - $1MM
Interest Rate: 7%+
Time to funding: 1-3 days
6+ months in business
500+ credit score
$8k+ gross monthly revenue
Businesses of all shapes and sizes borrow funds to secure the cash they need to pay everyday business expenses. One of the best ways to secure these funds is through working capital financing. In short, working capital financing is any loan you might take that's secured by a cash payment you'll receive in the future.
For those businesses that invoice their customers for payment at a later date, lenders will effectively purchase this invoice from you for, say, 80% of its value. When the customer pays the full invoice amount to the lender, you’ll get back the remaining 20% less a factoring fee (maybe 2%). This practice is known as factoring Accounts Receivable, because a customer invoice counts towards Accounts Receivable.
Invoice Financing is quite similar to Factoring. The key difference is that business who issued the invoice retains responsibility for obtaining payment from the customer. In Factoring, the lender will generally assume this responsibility.
There are a number of other ways business owners can procure the cash they need to fund normal operations outside of Working Capital Financing. Check out our pages on Business Lines of Credit, Term Loans, Business Credit Cards, Secured & Unsecured Business Loans, & Creative & Alternative Loans to learn more.
Frees up cash to spend on growth
Pay expenses before you receive cash from customers
Available without strong personal credit