The financial world is an industry that’s riddled with subtleties. Terms that sound very similar can often have different meanings, which makes a big difference when you’re shopping around for lending solutions.
If you’ve spent any amount of time on our website, you’ve probably noticed that factoring and receivables financing are two of our most popular options for helping businesses solve their cash flow problems. But what’s the difference between the two?
Keep reading to learn more about what makes factoring different from receivables financing so you can make the best possible choice for your business.
How Factoring Works
When finance companies talk about factoring, they’re referring to the outright purchase of a business’s outstanding accounts. This means invoices for goods or services that have yet to be paid by the customer. The factoring company typically purchases the accounts receivable at a slight discount from face value and charges a factoring fee.
How Receivables Financing Works
When finance companies talk about receivables financing, they’re referring to a method through which businesses can borrow against their outstanding accounts, rather than selling them outright. A collateral management fee is typically charged and interest is assessed on the amount “borrowed.”
The Commercial Finance Group Is Your Source For Lending Solutions
Clear as mud? If you still have questions about how factoring or receivables financing works, don’t hesitate to contact our team here at The Commercial Finance Group in Atlanta. We’ve been providing lending solutions for small to medium-sized businesses for year, and we’d be happy to explain your options for maximizing working capital.
