Invoice-Based Financing

What is Invoice-Based Financing?

Invoicebased financing is a type of shortterm financing that businesses use to access cash quickly. It involves selling unpaid invoices to a thirdparty lender in exchange for an upfront payment. The lender then collects the payment from the customer directly, typically taking a percentage of the invoice amount as their fee. Invoicebased financing is often used by businesses when they need quick access to cash or when they have difficulty obtaining traditional forms of financing.

INVOICE FINANCING PROCESS

  1. A business invoices a client for goods provided, giving them 30-120 days to pay (invoice maturity).
  2. The business transfers the invoice to a third-party financing company (financier).
  3. Funds are made available at a percentage (usually ~80%) of the invoice face value.
  4. The customer makes the invoice payment at maturity.
  5. Upon receiving the amount from the buyer, the financier remits the balance back to the business minus fees.

Benefits of Invoice-Based Financing

Types of Invoice Financing

Invoice Factoring

Invoice financing and invoice factoring are not synonymous; there are distinct differences between the two. With invoice financing, you receive an advance of capital that must be repaid, plus fees. With invoice factoring, you sell your invoices to a factoring company at a discounted rate, and they are responsible for collecting payments from your customers.

Accounts Receivable Line of Credit

An accounts receivable line of credit is a type of invoice financing that allows you to use your unpaid invoices to secure a line of credit. This type of financing provides you with access to capital up to 85% of the value of your invoices, and you can draw on the line as needed. Unlike traditional invoice financing or invoice factoring, where you receive a full advance, an accounts receivable line of credit charges an interest rate based on your balance and may include a draw fee for each time you access the credit line. With this form of financing, you retain ownership of your invoices and are responsible for collecting customer payments.

Qualifications for Invoice-Based Financing

Over $130K

ANNUAL REVENUE

600+

CREDIT SCORE

Over 1 Year

TIME IN BUSINESS

Ready to Apply?

Filthy Rich Idea makes it easy to get invoicebased financing for your business. Apply online and our lending partner, Business Funding Now, will give you a decision within minutes. One of their Loan Specialists will tailor a loan package for your business needs. As soon as your application and documents are received, a dedicated Funding Advisor will be in touch to discuss the application and next steps if approved. Approval typically takes 24-48 hours, and funds can be deposited into your account the following business day. It’s that simple!

Business Funding - Knowledge Is Wealth

Invoice Financing Costs and What Their Common Fees Mean

Invoice Financing Costs and What Their Common Fees Mean

Invoice financing costs are the fees associated with using invoice financing to access working capital. These costs can include interest,…

How Does Invoice Financing Work? What are the Pros and Cons?

How Does Invoice Financing Work? What are the Pros and Cons?

Invoice financing is a type of business financing that allows businesses to access the money they are owed by their…

FAQs

What information and documents do I need to apply for funding?

Our lending partners will need 3 months of bank statements, the government IDs of all applicants, 1 or 2 years of business tax documents, business P&L and balance sheets, business licenses and formation documents, and a business EIN.

What is APR?

APR stands for Annual Percentage Rate and is a measure of the cost of borrowing money. It is the interest rate expressed as a yearly rate, including fees and costs associated with the loan. It's a good way to gauge the overall cost of your loan and your planned repayment schedule.

How long does it take to get the money once my business is approved?

Once approved, transfer times vary depending on the lender, but it is possible to receive your capital in as little as 72 hours after approval. Lines of credit, on the other hand, may be used immediately upon receiving approval in some cases.

How do I pay back the funding amount?

Our lenders offer secure digital payment portals so that you can make your repayments on time and without penalty. You may be able to change due dates and other important information.

How To Best Prepare for a Business Loan

Determine the amount of money you will request—and do not request an excessive amount.

Although you may have the option of a small business loan, it is important to only request the amount of money that you need and can afford to pay back. This will demonstrate to your lender that you are financially responsible and increase your chances of approval.

Understand the limitations and costs of your loan.

Before committing to a loan, be sure to consider the speed, flexibility, and cost. Some loans are more or less flexible while others charge for speed. Understand the APR and other associated fees and costs so you can make an informed decision.

Avoid taking out multiple loans.

If you already have a loan, it is not advisable to take out another one. This is calledstacking loans and is generally not allowed, except in certain cases (e.g. having a business line of credit with a term loan). If you stack loans without the permission of your original lender, you could be in breach of your loan agreement and default on your first loan. Before taking on another loan, check with your lender to make sure it is allowed.

Ready to Apply?