|Cash flow statements||Not Required||Required|
|Complete financial statements||Not Required||Required|
|Income tax records||Not Required||Required|
|Proven financial track record||Not Required||Required|
|Future financial plan||Not Required||Required|
|Excellent personal credit||Not Required||Required|
|Borrowing amount||Invoice amounts
||Limited to bank terms|
|Interest cost basis||Invoice amounts||Entire bank loan|
|Perform receivable collections||Yes||No|
|Perform credit check of customers||Yes||No|
|Application approval process||3-5 business days||1-2 months|
|Cash availability||Instantly upon approval||1-2 months|
Factoring is often misunderstood as being an expensive method of financing. Actually, that's not true. Yes, when you compare the fee factors charge versus the interest rate banks charge, factoring appears to cost more. But factors provide services banks do not. They typically perform a significant portion of the accounting work for their clients; provide collection services and credit checks; and generate financial reports to let you know where you stand.
Business bank loans are very difficult to obtain these days. Not only are banks so heavily regulated by the federal government, but bank qualifications for a loan far exceed those for a factoring agreement. Bank qualifications are primarily based on the credit worthiness of the business and its owner. Factoring is based on the credit worthiness of the business’ customers. A business can qualify for factoring within days. A bank loan approval can take months. With factoring, cash is available almost immediately.